Alameda Research Drops Lawsuit Against Grayscale Amid GBTC Outflows
Alameda Research Ltd., the hedge fund associated with the bankrupt cryptocurrency exchange FTX, has voluntarily dropped its lawsuit against Grayscale Investments following a decrease in outflows from Grayscale’s Bitcoin Trust (GBTC).
Lawsuit Allegations and Background
The lawsuit, filed by Alameda Research in March 2023, claimed that over $9 billion in investor funds were trapped in Grayscale’s GBTC after the collapse of FTX. The lawsuit also alleged that Grayscale charged excessive fees.
Alameda Research sought an injunction to release value for Ethereum and Bitcoin Trusts shareholders as well as for FTX creditors and debtors. The lawsuit accused Grayscale of disregarding the Trusts’ agreements and drawing extravagant management fees.
The lawsuit was part of broader efforts to recover and maximize funds for FTX customers affected by the exchange’s collapse. FTX is facing numerous customer claims totaling $16 billion.
Grayscale’s Conversion to ETF
Grayscale recently converted GBTC into an ETF, allowing investors to redeem their shares. This conversion addressed the issue of redemption, resulting in significant outflows from GBTC since it began trading as an ETF.
Approximately $2.8 billion reportedly flowed out of GBTC after its conversion. Additionally, FTX sold over $1 billion in shares of GBTC, according to internal documents and sources familiar with the matter.
Alameda Research’s Decision to Drop Lawsuit
Alameda Research’s decision to drop the lawsuit against Grayscale coincided with these developments. Grayscale stated that Alameda’s withdrawal supports their view that the legal action had no merit.
Hot Take: Alameda Research Ends Lawsuit as Grayscale GBTC Converts to ETF
Alameda Research has voluntarily dropped its lawsuit against Grayscale Investments amid a decrease in outflows from Grayscale’s Bitcoin Trust (GBTC). The lawsuit, which alleged that investor funds were trapped in GBTC and that Grayscale charged excessive fees, was part of broader efforts to recover funds for FTX customers affected by the exchange’s collapse. However, with the recent conversion of GBTC into an ETF, investors have been able to redeem their shares, leading to significant outflows from GBTC. This development likely influenced Alameda Research’s decision to drop the lawsuit. Grayscale maintains that the legal action had no merit.
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