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FTX’s Trading Arm Drops Lawsuit Against Grayscale

Rubmar Garcia
by Rubmar Garcia
1 year ago
·
Posted in Crypto News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

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.

Related Reading: Grayscale Leads The Pack: Over $4 Billion Traded As Spot Bitcoin ETFs Go Hot

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.

Related Reading: Bitcoin Exchange Outflows & Inflows Hit Historical Highs, Volatility Soon?

BTCUSDT, BTC, Grayscale

Bitcoin is trading at $40,701.19 on the hourly chart. Source: BTCUSDT on TradingView.com
Featured Image from Unsplash.com, Chart from TradingView.com
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Rubmar Garcia

Rubmar Garcia

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Rubmar is a crypto enthusiast who likes learning and improving constantly. She enjoys reporting on the latest news and developments in the crypto industry. Rubmar also enjoys scrapbooking, crafting, simulation games, and watching football.

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