Is Grayscale Investments Withholding $9B In Shareholder Value? FTX Debtors Take Legal Action To Unlock It

Zinger Key Points
  • FTX Debtors accuse Grayscale of violating trust agreements.
  • FTX attorney dismisses U.S. Trustee Office's call for independent investigation, says digital assets at risk.

FTX Trading and its affiliated debtors (together, known as FTC Debtors) on Monday announced that one of their debtor affiliates, Alameda Research, filed a lawsuit against Grayscale Investments in the Court of Chancery in the State of Delaware.

The FTX Debtors also asserted claims against Grayscale's CEO Michael Sonnenshein and its owners Digital Currency Group and Barry Silbert.

The FTX Debtors are seeking injunctive relief to unlock $9 billion or more in value for shareholders of the Grayscale Bitcoin GBTC and Ethereum ETHE Trusts and realize over a quarter billion dollars in asset value for the FTX Debtors' customers and creditors.

The complaint stated that in the past two years alone, Grayscale extracted more than $1.3 billion in exorbitant management fees in violation of the trust agreements and for years it has hidden behind contrived excuses to prevent shareholders from redeeming their shares.

Also Read: Flip It And Restrict It: FTX Founder Sam Bankman-Fried's Bail Conditions Include Non-Internet Connected Phone

Grayscale's actions have resulted in the trusts' shares trading at approximately a 50% discount to Net Asset Value, the lawsuit claimed and added that if Grayscale reduced its fees and stopped improperly preventing redemptions, the FTX Debtors' shares would be worth at least $550 million, approximately 90% more than the current value of the FTX Debtors' shares today.

John J. Ray III, CEO and chief restructuring officer of the FTX Debtors said, "We will continue to use every tool we can to maximize recoveries for FTX customers and creditors. Our goal is to unlock value that we believe is currently being suppressed by Grayscale's self-dealing and improper redemption ban. FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscale's actions."

Meanwhile, the U.S. trustee in FTX's bankruptcy case has filed an appeal against a court order denying the appointment of an independent examiner to investigate the bankrupt exchange's collapse.

The judge previously stated that such an investigation could cost more than $100 million, which would be paid by FTX's Debtors and could potentially risk further loss through inadvertent disclosures or hacking.

FTX's committee of unsecured creditors and FTX itself had objected to the motion, with FTX attorney James Bromley arguing that investigating the company's financials could put assets at risk or lead them to go missing.

He stated, "With all due respect, the U.S. Trustee's Office views this as if we have a warehouse full of sacks of potatoes.."

Read Next: FTX Faces Massive $2.2B Asset Shortfall In Wallets Associated With, FTX.US Exchanges

Photo: 24Novembers via Shutterstock

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Posted In: CryptocurrencyNewsMarketsAlameda Researchasset managementdigital currencyFTX DebtorsGrayscale Investments
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