Collapsed crypto exchange FTX filed a lawsuit against Grayscale Investment, citing mismanagement of the firm as evidence that it was in violation of Trust agreements.
The FTX debtors also filed claims against Grayscale's CEO, Michael Sonnenshein, and its owners, Digital Currency Group and Barry Silbert.
The lawsuit, filed in the Court of Chancery in the state of Delaware, claims that in the past two years alone Grayscale has extracted over $1.3 billion in "exorbitant management fees" in violation of the Trust agreements.
It also claims that the "contrived excuses" used by the trust to prevent shareholders from redeeming their shares have resulted in the Trusts' shares trading at approximately a 50% discount to net asset value.
“The lawsuit filed by Sam Bankman-Fried’s hedge fund, Alameda Research, is misguided," a Grayscale spokesperson told The Block. "Grayscale has been transparent in our efforts to obtain regulatory approval to convert GBTC into an ETF – an outcome that is undoubtedly the best long-term product structure.”
FTX is seeking “injunctive relief to unlock $9 billion or more in value for shareholders."
The firm hopes to “realize over a quarter billion dollars in asset value for the FTX Debtors’ customers and creditors.”
The complaint alleges that if Grayscale had reduced its fees and “stopped improperly preventing redemptions,” then FTX debtors’ shares would be worth at least $550 million, approximately 90% more than their current value.
“Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban,” FTX CEO John Ray III said in a statement.
"FTX customers and creditors will benefit from additional recoveries," Ray said, "along with other Grayscale Trust investors that are being harmed by Grayscale's actions."
© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.