Alameda Research – an affiliate of the now defunct crypto exchange FTX – is suing Grayscale, the world’s largest bitcoin trust. The company claims Grayscale is unlawfully holding investments and refuses to unlock them so customers can receive due payments.
Alameda Research Is Suing Grayscale
Alameda was at the center of controversy several months ago when it was alleged Sam Bankman-Fried – the man behind both that firm and FTX – used customer funds from the latter firm to pay off loans taken out by the former. This was an illegal move given not only did he use funds that were not his, but he was not supposed to fuse both firms through the act of transacting or money exchanging.
In addition, Sam Bankman-Fried is purported to have used the money to buy luxury Bahamian real estate. He is now awaiting trial at his parents’ home in Northern California after being arrested and charged with several counts of fraud.
John J. Ray III – the new CEO of FTX and the man overseeing the bankruptcy proceedings for the company – says Grayscale has an “improper redemption ban,” and that such a maneuver is preventing customers from getting funds they’re rightfully owed. In a statement, he said:
FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscale’s actions. Grayscale has extracted over $1.3 billion in exorbitant management fees in violation of the trust agreements.
Naturally, a spokesperson for Grayscale is defending the company, and says the claims stemming from Alameda are “misguided.” They mentioned:
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.
Grayscale also saw controversy arise last year due to its ties to now failed crypto hedge fund Three Arrows Capital. The company says it held many shares in Grayscale, yet when it started to experience financial trouble and sought to recover the cash it had placed in the firm, recovery proved impossible.
The Death of FTX
FTX went bankrupt in November of last year. The trouble started when Sam Bankman-Fried announced online that his company was experiencing a liquidity crunch, and he needed fast cash to stay afloat. From there, it looked like Binance was potentially planning to buy the enterprise, though this failed to lead to anything significant, and it wasn’t long before FTX was shuttering its doors and its founder was trapped in a world of illegality and criminal claims.
It is believed that Grayscale might hold as much as $9 billion that FTX alleges should go to customers. Granted it can officially get its hands on the money, the monetary troubles it’s facing will likely vanish.