Grayscale, whose confidence has already been damaged following its refusal to publish its portfolio addresses, is being sued by Fir Tree, a New York hedge fund. The latter wants to force Grayscale to buy back some of its shares and to shed light on its real links with Digital Currency Group (DCG), its parent company, in order to avoid a second scenario at the FTX.
Grayscale finds itself cornered
Things get complicated for Grayscale : the company, already in difficulty, is being sued by the New York hedge fund Fir Treethe latter wishing to obtain information relating to possible conflicts of interest between the company supposed to hold 634,000 Bitcoins (BTC) in its vault and Digital Currency group (DCG)its parent company.
Indeed, Grayscale offers its famous Grayscale Bitcoin Trust (GBTC), a security aimed at institutional investors who want exposure to BTC without buying it directly. Thus, the GBTC offered to the latter is supposed to be assured of its equivalent in the reserves of Grayscale.
An assurance recently questioned in the face of Grayscale’s refusal to publicly publish its wallet addresses, the latter citing “security reasons” with rather vague outlines. In addition, the GBTC is currently offered in “discount”, displaying – 43.61% at the time of writing these lines compared to the price of BTCits reference underlying also called “NAV” (net asset value).
According to the complaint filed on Tuesday, Fir Tree notably accuses Grayscale for issuing numerous shares without ever repurchasing any, according to her because it would “reduce her profits”. Through various regulatory documents, Grayscale has for its part certified that it was not able to set up a “continuous buyback program”.
This solution, also called “redemption”, generally allows issuers of shares to increase the value of a security by reducing the number of shares outstandingwhich has the mechanical effect of strengthening earnings per share (EPS) and therefore benefiting shareholders.
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What are the purposes of the complaint?
According to information reported by Bloomberg, Fir Tree here wishes to force Grayscale to reduce its fees (higher than its competitors like Osprey Bitcoin Trust), to initiate its redemption process, but also to provide complete documentation relating to its links with Digital Currency Groupalso responsible for CoinDesk and Genesis.
Sure enough, the hedge fund fears a new scenario a la Three Arrows Capital (3AC) or FTX, in which several intertwined societies end up sinking each other given their intrinsic financial ties.
Otherwise, Fir Tree wants to stop Grayscale from converting its GBTC into an exchange-traded fund (ETF)which would be, however, according to a Grayscale spokesperson, the only way to buy back the issued shares:
“In 2013, we launched Grayscale Bitcoin Trust to provide investors with access to Bitcoin, and still with the intention of converting it into ETFs when US regulators allow it. We remain 100% committed to converting GBTC into an ETF, as we strongly believe this is the best long-term product structure for GBTC and its shareholders. »
According to Fir Tree, as many as 850,000 investors have been harmed by Grayscale’s inaction regarding its shareholder policy. A case to follow, which will not help the already difficult situation experienced by Grayscale and its GBTC.
👉 To deepen – Institutionals massively close their short positions on Bitcoin (BTC)
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Sources: Bloomberg, YCharts
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Passionate about the world of decentralized finance and the novelties brought by Web 3.0, I write articles for Cryptoast to help make blockchain more accessible to everyone. Convinced that cryptocurrencies will change the future very soon.
Maximilien Prue
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