Alameda Sues Grayscale Over $9 Billion Locked in Bitcoin Trust Shares

Failed crypto company FTX announced today that its affiliate Alameda Research is suing asset manager Grayscale Investments in a bid to unlock investments that it says are being improperly withheld from its customers. 

In a Monday statement, FTX’s new boss John J. Ray III—who is overseeing the bankruptcy process of the collapsed crypto exchange—said Grayscale had an “improper redemption ban” that was stopping customers from getting their money. 

FTX went bankrupt in November in a spectacular crash after its team allegedly mismanaged the exchange by commingling funds and making risky bets with customer cash via Alameda. 

Hundreds of millions of dollars in client cash is now missing—with a large amount presumed stolen—and its ex-CEO and co-founder Sam Bankman-Fried is facing a long list of criminal charges in American courts. 

“FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscale’s actions,” said Ray. 

FTX further alleged that in the past two years alone, “Grayscale has extracted over $1.3 billion in exorbitant management fees in violation of the Trust agreements.”

FTX said in Monday’s statement that if Grayscale had reduced those fees and allowed investors to withdraw their cash, then FTX’s shares would be worth nearly 90% more than now—at least $550 million. 

FTX debtors are now seeking injunctive relief to unlock $9 billion or more in value for Grayscale shareholders. 

FTX customer cash is locked up in Grayscale as they were drawn to its investment vehicle that enables investors to trade shares in trusts holding large pools of Bitcoin or Ethereum. 

A Grayscale spokesperson told Decrypt that the lawsuit was “misguided.” 

“Grayscale has been transparent in our efforts to obtain regulatory approval to convert GBTC into an ETF [exchange-traded fund]—an outcome that is undoubtedly the best long-term product structure for Grayscale’s investors,” the comment added. 

Failed crypto hedge fund Three Arrows Capital (3AC) also found itself in trouble with Grayscale. The firm, which went bankrupt last year, held lots of Grayscale shares. But when its finances started to go pear-shaped, it couldn’t recover the cash.