3. Grayscale is Sued for Data on Battered Bitcoin Trust
- Fir Tree is suing Grayscale Investments for information to investigate potential mismanagement and conflicts of interest at its $10.7 billion Bitcoin fund.
- The hedge fund alleges that Grayscale’s redemption bar, which dates from 2014, is “self-imposed”. It also claims Grayscale refuses to redeem shares because doing so would cut into profits.
Fir Tree Capital Management, which manages $3 billion, is suing Grayscale Investments for information to investigate potential mismanagement and conflicts of interest at its $10.7 billion Bitcoin fund.
According to a complaint filed Tuesday in Delaware Chancery Court, the Grayscale Bitcoin Trust closed Monday at a 43% discount to the value of the Bitcoin it holds, in part because the firm issued many shares in the past few years and didn’t redeem any of them.
Fir Tree wants to use the information to push Grayscale to erase the discount by lowering fees and resuming redemptions.
The hedge fund alleges that Grayscale’s redemption bar, which dates from 2014, is “self-imposed”. It also claims Grayscale refuses to redeem shares because doing so would cut into profits.
Fir Tree said it wants Grayscale to stop its efforts to convert the trust into an exchange-traded fund, which Grayscale claims is the only way it can legally redeem shares.
The Grayscale Bitcoin Trust’s publicly traded shares have plunged about 75% this year, as the industry deals with the fallout from last month’s bankruptcy of Sam Bankman-Fried’s crypto exchange FTX and a tumble in Bitcoin and other cryptocurrencies.
The trust boomed in popularity during crypto’s bull run in 2020 and 2021, quickly becoming the world’s biggest digital-assets fund as investors looked for access to Bitcoin without having to buy the coins directly.
Grayscale is owned by Barry Silbert’s Digital Currency Group, which also runs Genesis Global Trading, a crypto lender and broker that halted withdrawals in November — fueling questions about the health of its parent.
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