Alameda Research Settles with Grayscale as GBTC Sees Outflows

Grayscale Investments has been relieved of a lawsuit after Alameda Research decided to drop the case against them. The legal action was initiated back in March 2023, alleging that Grayscale was implementing practices that were suppressing the value of FTX debtors’ assets. Alameda Research specifically sought a court order to prevent the charging of management fees, which had surpassed $1.3 billion by the time the lawsuit was filed. Furthermore, the suit accused Grayscale of having a “self-imposed redemption ban” that dissuades shareholders from redeeming Grayscale Bitcoin (GBTC) and Ethereum Trusts shares.

At the time of filing, FTX declared that if Grayscale reduced its fees and stopped preventing redemptions, the value of FTX Debtors’ shares would increase by approximately 90%, reaching an estimated $550 million. The lawsuit named Grayscale CEO Michael Sonnenshein, as well as parent company Digital Currency Group (DCG) and its CEO, Barry Silbert. Silbert had resigned from the Grayscale board in December.

However, Alameda Research has decided to drop the lawsuit voluntarily, as reported in a statement by a Grayscale spokesperson. They affirmed that the dismissal of the case highlights Grayscale’s belief that the legal action held no merit. It seems that the situation has been resolved amicably, with both parties moving forward from the dispute.

Meanwhile, GBTC, which was converted into a spot exchange-traded fund (ETF) and received approval from the United States Securities and Exchange Commission (SEC) on January 10, still retains a high management fee of 1.5% compared to its competitors. Since its conversion to an ETF, GBTC has experienced significant outflows, causing its assets under management to decrease by nearly $5 billion to $23.7 billion on January 18. Surprisingly, this decline contradicts the positive trend observed in most other spot Bitcoin (BTC) ETFs.

In conclusion, Grayscale Investments can now breathe a sigh of relief as Alameda Research has dropped its lawsuit against them. The allegations of suppressing the value of FTX debtors’ assets and charging excessive management fees have been laid to rest. GBTC’s conversion to an ETF and subsequent outflows have presented some challenges for Grayscale, but only time will tell how this will affect the company’s assets under management in the long run.