Alameda Research Sues Grayscale and Its Owners Aiming to Retrieve $9B+

On Monday, March 6th, the FTX Group announced that Alameda Research is suing Grayscale, as well as its owners and executives. According to the press release, Grayscale has been charging exorbitant fees and has been using contrived excuses to prevent shareholders from accessing their assets. Alameda is hoping to retrieve at least $9 billion from Grayscale.

Alameda Research Sues Grayscale

On Monday, March 6th, the FTX Group revealed that it is suing Barry Silbert and his Digital Currency Group, as well as its subsidiary, Grayscale Investments, and its CEO Michael Sonnenshein. According to the announcement, FTX’s Alameda Research is seeking to retrieve at least $9 billion currently locked with Grayscale:

  • In the past two years alone, Grayscale has extracted over $1.3 billion in exorbitant management fees in violation of the Trust agreements.
  • Grayscale has for years hidden behind contrived excuses to prevent shareholders from redeeming their shares.
  • Grayscale’s actions have resulted in the Trusts’ shares trading at approximately a 50% discount to Net Asset Value.
  • If Grayscale reduced its fees and stopped improperly preventing redemptions, the FTX Debtors’ shares would be worth at least $550 million, approximately 90% more than the current value of the FTX Debtors’ shares today.

FTX debtors are alleging that Grayscale is in violation of Trust Agreements and Fiduciary Duty. They are also seeking a reduction of exorbitant fees which have, according to the press release, already netter Grayscale $1.3 billion over a period of two years. Furthermore, John J. Ray’s team is claiming that the DCG Subsidiary’s practices have caused the significant trading discount for the Grayscale Bitcoin Trust.

Furthermore, the lawsuit claims that Grayscale “has for years hidden behind contrived excuses to prevent shareholders from redeeming their shares”. FTX’s current CEO, John J. Ray III, stated in the announcement that his team “continues to use every tool we can to maximize recoveries for FTX customers and creditors”, and added that the “goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban.” He also stated that both FTX’s creditors and Grayscale’s investors will benefit from the action.

This isn’t the first time the DCG found itself accused of wrongdoing in the wake of the FTX collapse. January saw a public feud between the Winklevoss twins and Barry Silbert over Gemini’s funds stuck on Genesis—a feud that has only recently been resolved after an agreement on the sale of Genesis’ assets was reached.

FTX’s Struggle to Retrieve Its Assets

The first weeks following the collapse of FTX brought grim tidings to the exchange’s customers as it seemed increasingly unlikely that their funds would ever be recovered. Soon after taking over, John J. Ray III stated that the cryptocurrency exchange was “worse than Enron”. Allegations of comingling of users’ assets, and misappropriation of customers’ funds—allegations seemingly confirmed by Caroline Ellison after she entered her guilty plea—also put no mind to ease.

In late 2022, Ray also stated that FTX had next to no record-keeping and even actively sought to destroy them in some instances. The numerous asset recovery-related issue led the company’s new management to hire forensic investigators to help in the search. In early 2023, however, the search started bearing fruit.

In mid-January, FTX shared an update on its efforts claiming it had identified $5.5 billion worth of assets and stated that the task was “Herculean”. More recently, another update reiterated that both FTX international, and FTX.US still had a “massive shortfall” and explained that most of the located assets are not liquid. The press release also stated that the debtors have identified that nearly $9 billion worth of customer assets are still missing.

This article originally appeared on The Tokenist

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