Hedge fund Fir Tree sued Grayscale
Plaintiff demands that the company disclose its bitcoin holdings, reduce commissions and begin repurchasing shares
Hedge fund Fir Tree Capital Management has sued Grayscale Investments demanding information to investigate possible mismanagement of its $10.7 billion Grayscale Bitcoin Trust (GBTC) fund, according to Bloomberg.
Grayscale Investments is a digital asset management company that allows investors in the U.S. to purchase cryptocurrency investment products in a regulated environment through traditional market instruments. The company launched the Grayscale Bitcoin Trust in 2013, a fund similar to an ETF in that it is backed by bitcoin and matches its price. It is not registered with the SEC, so only accredited investors have access to it.
A lawsuit filed Dec. 6 in Delaware Chancery Court says GBTC closed Monday at a 43 percent discount to the value of the bitcoins it owns, in part because the firm has issued many shares over the past few years and hasn't redeemed any of them. The trust's publicly traded shares are down about 75 percent this year.
The lawsuit alleges that about 850,000 retail investors have suffered from "unfriendly actions" by Grayscale shareholders. Fir Tree, which has $3 billion under management, wants to use the information it receives from Grayscale to force the management company to lower commissions and begin buying back shares, sources familiar with the hedge fund's plans told the publication.
Fir Tree argues that Grayscale's share buyback ban, which began in 2014, is an imposition.
Grayscale said in regulatory filings that it could not offer a "permanent buyout program." But the hedge fund claims that Grayscale refuses to buy back shares because doing so would reduce its profits.
Fir Tree also intends to force Grayscale to lower fees. Grayscale raised $615.4 million in fees last year, Fir Tree reported.
Grayscale is owned by Digital Currency Group, which also runs crypto platform Genesis Global Trading, which reported in November that it had temporarily suspended redemptions and new loans due to market turmoil and the collapse of FTX. As it became known this week, Genesis owes about $1.8 billion to its creditors.