The events in the cryptocurrency market are endless. Recently, collapses, bankruptcies and lawsuits have started to take up a serious place on the agenda of the market. Now, a lawsuit has been filed against a Bitcoin mutual fund. Fir Tree Capital Management has sued Grayscale Investments to investigate potential mismanagement and conflicts of interest in the $10.7 billion Bitcoin fund.
Fir Tree files lawsuit against cryptocurrency fund GBTC
On Tuesday, a complaint was filed with the Delaware Chancery Court about the Grayscale Bitcoin Trust (GBTC). The complaint alludes to the fact that the company closed Monday at a 43% discount from the value of Bitcoin it held, partly because the company has issued a large number of shares over the past few years and has not bought any back. As you follow on Kriptokoin.com, the industry was hit last month by the bankruptcy of Sam Bankman-Fried’s crypto exchange FTX. After that, Bitcoin and other cryptocurrencies saw sharp drops. That’s why GBTC’s publicly traded shares have dropped nearly 75% this year.
People familiar with the hedge fund’s plans say that Fir Tree, which manages $3 billion, wants to use the information to force Grayscale to delete the discount by cutting fees and maintaining refunds. The complaint mentions the fund’s approximately 850,000 individual investors who were “harmed by Grayscale’s hostile behavior towards shareholders.”
Grayscale is owned by Barry Silbert’s Digital Currency Group, which also runs Genesis Global Trading. Genesis, a crypto lending company, stopped withdrawals in November. So, it raised questions about the health of the main partner. In a statement, a Grayscale spokesperson said:
In 2013, we launched the Grayscale Bitcoin Trust (GBTC) with the intention of giving investors access to Bitcoin and always converting it into an ETF when permitted by US regulators. We strongly believe this is the best long-term product structure for GBTC and its shareholders. That’s why we are 100% committed to converting GBTC to an ETF.
What is the hedge fund?
Fir Tree claims Grayscale’s redemption chart from 2014 was self-imposed. The hedge fund says that as long as it complies with securities laws, there is no legal reason to prevent the fund from allowing investors to exit. Grayscale, on the other hand, states in regulatory documents that it cannot offer an “ongoing reimbursement program.”
The hedge fund claims Grayscale refused to buy back shares because doing so would reduce profits. According to the lawsuit, the company sold an ‘enormous number’ of new shares between 2018 and 2021. It charges 2% of the market value of Bitcoin assets instead of the low market price of the shares. This is higher than competitors like Osprey Bitcoin Trust. Meanwhile, Fir Tree said Grayscale raised $615.4 million in fees last year.
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