FTX Debtors File Lawsuit Against Grayscale Investments, LLC and its CEO and Owners

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FTX Debtors Demand Injunctive Relief to Allow Redemptions and Reduce Fees in Grayscale Trusts

Grayscale and its Controllers Continue to Breach Trust Agreements and Fiduciary Duties

Grayscale's Self-Imposed Redemption Ban Prevents Realization of Approximately $9 Billion of Value

WILMINGTON, Del., March 6, 2023 /PRNewswire/ -- FTX Trading Ltd. and its affiliated debtors (together, the "FTX Debtors") today announced that one of their debtor affiliates, Alameda Research Ltd., filed a lawsuit against Grayscale Investments, LLC ("Grayscale") 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 and Ethereum Trusts (the "Trusts") and realize over a quarter billion dollars in asset value for the FTX Debtors' customers and creditors. As described in the complaint:

  • In the past two years alone, Grayscale has extracted over $1.3 billion in exorbitant management fees in violation of the Trust agreements.
  • Grayscale has for years hidden behind contrived excuses to prevent shareholders from redeeming their shares.
  • Grayscale's actions have resulted in the Trusts' shares trading at approximately a 50% discount to Net Asset Value.
  • 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, Chief Executive Officer 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."

Advisors

The FTX Debtors are represented in this action by Quinn Emanuel Urquhart & Sullivan, LLP as legal counsel, and Abrams & Bayliss LLP as Delaware counsel. In their chapter 11 cases, the FTX Debtors are also represented by Sullivan & Cromwell LLP as legal counsel and Landis Rath & Cobb LLP as Delaware counsel.

SOURCE FTX

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