FTX sues Grayscale and DCG, citing 'exorbitant' fees

Quick Take

  • FTX’ debtors are suing Grayscale Investment, its owners and its CEO over their handling of the Grayscale Bitcoin and Ethereum Trusts, claiming that the trust’s “exorbitant” management fees violated its trust agreements.
  • The exchange is seeking injunctive relief to unlock a potential $9 billion of shareholder value.
  • Debtors claim shares would be worth $550 million, or 90% more if the asset manager reduced fees and allowed redemptions.

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."


Keep up with the latest news, trends, charts and views on crypto and DeFi with a new biweekly newsletter from The Block's Frank Chaparro

By signing-up you agree to our Terms of Service and Privacy Policy
By signing-up you agree to our Terms of Service and Privacy Policy

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. 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.

About Author

Frank Chaparro is the Editor At Large at The Block. Chaparro started his career at Business Insider, where he specialized in the intersection of digital assets and Wall Street, market structure, and financial technology. Soon after joining Business Insider out of Fordham University, Chaparro was interviewing top finance and tech executives, including billionaire Mark Cuban, “Flash Boys” star Brad Katsuyama, Cboe Global Markets CEO Ed Tilly, and New York Stock Exchange President Tom Farley. In 2018, he become a sought after reporter in the crypto world, interviewing luminaries such as Tyler Winklevoss, the cofounder of Gemini, Jeremy Allaire, the CEO of Circle, and Fundstrat head Tom Lee. He runs his own podcast The Scoop and writes a biweekly eponymous newsletter. He leads special projects, including The Block's flagship podcast, The Scoop. Prior to The Block, he held roles at Business Insider, NPR, and Nasdaq. For inquiries or tips, email [email protected].


To contact the editors of this story:
Christiana Loureiro at
[email protected]
Michael McSweeney at
[email protected]