The latest company to file a complaint against rival Grayscale Investments over its $15 billion Bitcoin fund is digital-asset manager Osprey Funds. It’s neither the first nor the last case for Grayscale.
According to a complaint filed Monday in Connecticut Superior Court, Osprey accused Grayscale of running false and deceptive advertising for the Grayscale Bitcoin Trust (ticker GBTC) since late 2020. As a deferred conclusion, Grayscale stated that GBTC will be transformed into an exchange-traded fund. The lawsuit, however, stated that it was aware that access was never going to occur. In June, the US Securities and Exchange Commission (SEC) rejected Grayscale’s conversion application. They convinced the corporation to file a lawsuit against the Securities and Exchange Commission.
The firm denounces lawsuit as frivolous
According to Osprey, Grayscale has been able to capture over 99.5% of assets in trust-based crypto products because of those unlawful trade methods. Although GBTC charges four times as much as Osprey’s comparable product, it is nevertheless favored. Osprey, located in Fairfield, Connecticut, oversees over $100 million in assets.
The litigation brought by Osprey Funds against Grayscale Holdings is frivolous, according to a spokesperson for the latter. For Grayscale’s investors, the best long-term product structure is to convert GBTC to an ETF. In addition, industry peers would benefit directly from the approval of a Bitcoin ETF spot. According to a Grayscale spokesperson, they are optimistic about their shared judgment and compelling legal arguments and anticipate a final ruling from the DC Court of Appeals in Fall 2023.
In comparison to Osprey’s Bitcoin trust, established in 2019, GBTC was founded in 2013.
Grayscale’s deep discount – a blessing and a curse
In an earlier announcement in January, Osprey had called out GBTC’s huge discount, which is currently around 41%. It said that it was trying to be adopted as the beleaguered product’s sponsor to encourage adjustments. It also claimed at the time that it would lower GBTC’s management fee to 2% if it were in charge.
However, due to its trading at a discount, GBTC has come under fire on several other fronts. Moreover, Genesis’ lending unit filed for bankruptcy recently due to problems with its parent firm, Digital Currency Group. Fir Tree, a hedge fund, sued GBTC’s asset manager, blaming it for the discount. Meanwhile, Valkyrie began a campaign to overthrow Grayscale as an activist.
According to Osprey, Grayscale has promoted itself and its sponsored trusts, particularly the Grayscale Bitcoin Trust, by portraying their services as offering access to investment choices that are more secure and less risky than they actually are via a variety of unfair and deceptive tactics.