Alameda Research Takes on Grayscale For Alleged Excessive Fees – What’s the Story?


Pixabay / Level17Design

In a bold attempt to ‘secure maximum recoveries’, Alameda Research has launched a lawsuit against Grayscale Investments.

The allegations include charging ‘exorbitant management fees’ and ‘preventing redemptions’. CEO Michael Sonnenshein was named in the case.

Grayscale’s main products are the Bitcoin Trust (GBTC) and the Ether Trust (ETHE). Both of these are subject to a 2% annual management fee, which is double the industry average according to Bloomberg data.

Investors who deposit Bitcoin or Ethereum receive shares in the trusts. Alameda claims to own $290m worth of shares in both GBTC and ETHE, which is 3% and 2% of their respective trusts.

If redemptions were allowed, Alameda claims their stake would be worth $540m.

GBTC Redemptions Still Frozen

Currently, a regulation at GBTC prevents investors from selling their shares for 6 months after investing. This has caused the trust to trade at a significant discount to BTC and ETH, creating a massive gridlock of capital.

At the moment, GBTC is trading with a -42.11% discount to net asset value.

Grayscale has so far refused to allow redemptions due to fears of the effect it could have on Bitcoin’s price and their operations. After their conversion to an ETF was denied by the SEC last year, Grayscale is now suing the regulator.

Grayscale have responded to the Alameda lawsuit, calling it ‘misguided’. This comes just before oral arguments in Grayscale’s case against the SEC.

In a statement, CEO Michael Sonnenshein defended Grayscale’s actions and fees. He said that Grayscale has been transparent in their efforts to convert GBTC into an ETF, which he believes is the best long-term product structure for investors.

The firm says they are confident in their argument against the SEC, which will be heard today.

Alameda Join List of GBTC Lawsuits

Grayscale have been hit with lawsuits before, including one from Osprey Funds in January. Fir Tree Capital Management also alleged that GBTC’s retail investors were being harmed by Grayscale’s ‘unfriendly’ actions in pursuing the ETF.

Related articles

Recent articles