Alameda Research Sues Grayscale Investments Seeking to Unlock Billions in Value for Shareholders

Debtors FTX and a subsidiary of Alameda Research Ltd. filed a lawsuit against Grayscale Investments seeking an injunction to unlock $9 billion for Grayscale Bitcoin and Ethereum Trusts shareholders. The debtors allege that “Grayscale received over $1.3 billion in exorbitant management fees in violation of the trust agreements.”

FTX debtors accuse Grayscale of exorbitant management fees and breach of trust agreements

IN Press release Released March 6, 2023, debtors FTX and Alameda Research, the company’s now-defunct quantitative trading firm, announced that Alameda is suing digital currency fund manager Grayscale Investments. Alameda is seeking an injunction to allow foreclosures and lower fees associated with Grayscale Bitcoin and Ethereum Trusts. The debtors allege that Grayscale and its management team continue to “violate trust agreements and fiduciary duties.”

Alameda also alleges that Grayscale’s unauthorized redemption ban prevents “the realization of a value of approximately $9 billion.” CEO and Chief Restructuring Officer John J. Ray III issued a statement regarding the lawsuit against Grayscale, saying: “We will continue to use all possible tools to recover the maximum amount of losses to FTX customers and creditors.” FTX debt restructuring officer added:

Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s selfish and wrongful redemption ban. FTX clients and lenders will benefit from additional refunds, as will other Grayscale Trust investors who have been affected by Grayscale’s actions.

The lawsuit against Grayscale follows Alameda’s lawsuit against Voyager Digital in late January 2023. The complaint alleged that Voyager received a preferential transfer of ownership from Alameda Research and the firm sought to recover approximately $445.8 million from the bankrupt business. Voyager agreed to provide $445 million to pay Alameda, and both parties agreed to participate in a non-binding mediation.

A press release from FTX’s debtors alleges that for years, Grayscale “hid behind bogus pretexts” to prevent shareholders from buying back their shares. He also noted that Bitcoin Trust (GBTC) is trading 50% below its net asset value (NAV). GBTC statistics on Tuesday show the current discount 42.11% to NAV.

“If Grayscale cuts its fees and stops the wrongful avoidance of buyback, FTX Debt Shares will be worth at least $550 million, which is approximately 90% more than the current value of FTX Debt Shares today,” the lawsuit against Grayscale says.

How do you think the lawsuit against Grayscale Investments will end? Share your thoughts in the comments section below.