An Attempt to Recover Assets
After crypto exchange FTX and its trading arm Alameda Research filed for bankruptcy in November 2022, the failed company has been attempting to recover assets to refund its creditors. In a new development, the FTX affiliate has decided to drop its lawsuit against Digital asset manager Grayscale voluntarily.
An Attempt To “Recover Hundreds Of Millions Of Dollars”
According to a report from Reuters, Alameda Research has decided to drop the lawsuit against Grayscale this Monday, as a court filing showed.
In March 2023, Alameda filed a lawsuit in a Court in Delaware against Grayscale, its parent company Digital Currency Group, Inc. (DCG), and the CEOs of both companies, Michael Sonnenshein and Barry Silbert.
In this lawsuit, they accused the digital asset manager of abusing “their control over nearly $19 billion of digital assets held in two trusts to enrich themselves at the expense of trust shareholders.”
Additionally, the bankrupted crypto exchange accused Grayscale of charging excessively high fees and refusing to allow investors to redeem their shares from the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust.
Nonetheless, Alameda’s goal “to recover the hundreds of millions of dollars in harm that it is suffering at Defendants’ hands” will no longer be accomplished through the lawsuit, as they have voluntarily dismissed it.
A Grayscale spokesperson told Reuters, “Alameda’s voluntary dismissal underscores Grayscale’s position that this legal action was entirely without merit.”
Alameda dropped its lawsuit against Grayscale after the latter converted GBTC into an exchange-traded fund (ETF), eliminating the restrictions that Alameda was challenging in court.
FTX Responsible for 1/3 of GBTC’s Outflows
GBTC started trading as a spot Bitcoin ETF earlier this month after the US Securities and Exchange Commission (SEC) approved the financial product, which, as it’s worth noting, was possible due to Grayscale’s previous victory against the SEC for denying the conversion of their Bitcoin Trust into an ETF.
Since the approval of the ETFs, there has been a historical record of inflows into 10 of the ETFs. Simultaneously, there has been a huge amount of outflow volume coming from GBTC since January 11. Grayscale has seen $2.8 billion outflows in the previously recorded trading days.
Most of this sum has been believed to be caused by investor redeeming their previously owned GBTC shares to invest in an ETF with lower fees than Grayscale’s.
However, in a recent turn of events, CoinDesk has reported that FTX has sold 22 million shares since the ETF launch, accounting for an amount close to $1 billion and taking FTX’s GBTC ownership down to zero. The statement comes after the site reviewed “private data” and consulted with “two people familiar with the matter.”
FTX’s sale of GBTC’s shares accounts for approximately 1/3 of the total outflows that GBTC has received recently, influencing BTC’s price over the last few weeks. Bitcoin price is currently trading at $40,701.19, a 2.6% decline over the last 24 hours.
Hot Take: FTX Drops Lawsuit Against Grayscale as GBTC Outflows Continue
After filing for bankruptcy in November 2022, crypto exchange FTX and its trading arm Alameda Research have been trying to recover assets to repay creditors. However, Alameda Research has now voluntarily dropped its lawsuit against digital asset manager Grayscale. The lawsuit accused Grayscale of abusing their control over digital assets and charging excessive fees. Alameda’s goal to recover hundreds of millions of dollars in damages will no longer be pursued through the lawsuit. Grayscale dismissed the legal action as entirely without merit. The drop in the lawsuit coincides with Grayscale converting GBTC into an ETF, addressing the restrictions challenged by Alameda. Meanwhile, FTX’s sale of GBTC shares accounts for a significant portion of the outflows that GBTC has experienced recently, impacting Bitcoin’s price.
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