FTX trading affiliate Alameda Research has filed a new lawsuit against Grayscale Investments seeking to unlock investments it claims are being wrongly withheld from its customers.
The suit was launched in the Court of Chancery in the State of Delaware, and it names CEO Michael Sonnenshein, and the parent company, Digital Currency Group, as defendants.
Alameda Sues Grayscale
Embattled crypto investment firm Alameda Research is suing crypto assets manager Grayscale.
According to Alameda’s complaint, FTX’s new CEO John J. Ray III — who is steering the bankruptcy process of the defunct crypto exchange — said Grayscale “contrived excuses” to prevent customers from redeeming their shares in what he described as a “self-imposed redemption ban.”
1/ FTX CEO John Ray enters the ring.
FTX filed a lawsuit against Grayscale and its parent company.
This is a surprise.
John Ray is turning over every rock – including legal challenges to Grayscale’s model – to maximize recoveries for FTX creditors.https://t.co/x1xl89B0cP
— Ram Ahluwalia, crypto CFA (@ramahluwalia) March 6, 2023
The lawsuit was lodged in a bid to “unlock $9 billion or more in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts […] and realize over a quarter billion dollars in asset value for the FTX Debtors’ customers and creditors” per the Monday statement.
Sam Bankman-Fried, the disgraced founder and CEO of FTX, also co-founded Alameda in 2017. A day before FTX filed for bankruptcy in November 2022, it was uncovered that the Bahamas-based cryptocurrency exchange had lent customer funds to help shore up the trading firm.
Since pleading not guilty to defrauding billions of dollars from his fallen crypto empire and paying a $250 million bond, Bankman-Fried has been living at his parent’s Palo Alto mansion in California as he faces a multitude of criminal charges in the United States.
Alameda alleged that Grayscale extracted over $1.3 billion in management fees in violation of trust agreements. As a result, the Trusts’ shares trade “at approximately a 50% discount to Net Asset Value.” The plaintiff believes that if Grayscale had slashed those fees and allowed investors to withdraw their funds, FTX’s shares would be worth $550 million — nearly 90% more than their current value.
“FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscale’s actions,” Ray added.
Grayscale Slams Alameda’s ‘Misguided’ Lawsuit
A Grayscale spokesperson called the Alameda suit “misguided”, adding that the company “has been transparent in our efforts to obtain regulatory approval to convert GBTC into an [exchange-traded fund] — an outcome that is undoubtedly the best long-term product structure for Grayscale’s investors.”
The news of Alameda’s lawsuit against Grayscale comes after the failed crypto trading firm in late January sought to recover $445.8 million paid to bankrupt Voyager Digital prior to Alameda’s own bankruptcy filing.