Hedge funds based in New York are demanding that Grayscale reveal details about its flagship Bitcoin trust, which the funds believe may indicate mismanagement.
In an effort to compel Grayscale Investments to alter its management of its flagship Bitcoin Trust, Fir Tree Capital Management has filed a lawsuit against the firm.
Bloomberg reports that on December 6 a lawsuit demanding that Grayscale reduce its fees, begin redemptions, and hand over documents related to its relationship with the Digital Currency Group was filed against Grayscale in the Delaware Court of Chancery.
Moreover, the hedge fund opposes Grayscale’s plans to transform the $10.7 billion Grayscale Bitcoin Trust (GBTC) into a spot ETF (ETF).
According to the New York hedge fund’s complaint, “around 850,000 retail investors were harmed by Grayscale’s shareholder-unfriendly actions.”
Data from Ycharts shows that Grayscale’s Bitcoin trust shares are trading at a near-record 43% discount to the Net Asset Value (NAV) of the digital asset, Bitcoin.
There is no redemption program for fiat or crypto, so GBTC holders are stuck with their holdings unless they can find a buyer on the secondary market.
Fir Tree claims Grayscale’s 2014 redemption bar is “self-imposed,” and that the company is refusing to redeem shares because doing so would reduce profits.
Grayscale’s attempts to transform the trust into an exchange-traded fund (ETF) have been unsuccessful for years, and the company wants Grayscale to give up on the idea.
According to the complaint filed by Fir Tree’s legal team, “that strategy will likely cost years of litigation, millions of dollars in legal fees, countless hours of lost management time, and goodwill with regulators.” “During this time, Grayscale will continue to collect fees from the trust’s dwindling assets.”
In any case, Grayscale has insisted that it will be able to issue and redeem shares once the funds are converted to an ETF.
A representative for Grayscale told Cointelegraph that the company has always intended to turn the GBTC into an ETF if and when the SEC and other US authorities give their approval.
We continue to be fully dedicated to converting GBTC to an ETF because we are confident that this is the most advantageous product structure for the long-term success of GBTC and its shareholders.
Grayscale’s mission is to provide investors with easy, safe, and transparent access to the rapidly developing crypto ecosystem. We value open communication with our investors and welcome their feedback on how to improve our product lineup and business operations.
In the weeks following the shutdown of the defunct crypto exchange FTX, the discount on GBTC shares relative to Bitcoin widened to nearly 50%.
Since hitting an all-time high of $51.47 per share on November 12, 2021, GBTC shares have been steadily declining, with the price per share sitting at $8.76 at the time of writing, according to Yahoo Finance.