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Grayscale’s Fir Tree fund sues to modify Bitcoin Trust

Potential mismanagement:

The New York-based hedge funds request information from Grayscale concerning its flagship Bitcoin trust because it may indicate possible mismanagement.

Fir Tree Capital Management is suing grayscale Investments for information that could be used to change how it manages its flagship Bitcoin Trust.

Bloomberg reports that a complaint against Grayscale was submitted on December 6 to the Delaware Court of Chancery. The complaint requests that Grayscale reduce its fees, begin redemptions, and provide documentation about its business dealings with the Digital Currency Group.

Also opposed by the hedge fund is Grayscale’s attempt to turn its $10.7 billion Grayscale Bitcoin Trust (GBTC) into a spot exchange-traded fund (ETF).

In its complaint, the New York-based hedge fund said that Grayscale’s shareholder-unfriendly conduct had “harmed” about 850,000 retail investors.

Fir tree funds:

According to information from Ycharts, shares of Grayscale’s Bitcoin trust currently trade at a near-record 43% discount to the Net Asset Value (NAV) of the trust’s underlying digital asset, Bitcoin.

The fact that GBTC does not offer a redemption scheme into fiat currency or another cryptocurrency leaves holders with few to no options for getting out of their GBTC positions other than selling them to other market participants, which explains a large portion of this.

Fir Tree asserts that Grayscale’s 2014 redemption restriction is “self-imposed” and that Grayscale refuses to redeem shares since doing so will reduce revenues.

The company also wants Grayscale to quit trying to turn the trust into an ETF, which it has been attempting to do unsuccessfully for several years.

According to Fir Tree’s attorneys, “such technique will probably cost years of litigation, millions of dollars in legal bills, countless hours of lost management time, and goodwill with regulators.” Grayscale will keep getting paid from the trust’s declining assets throughout.

Grayscale take:

However, Grayscale has insisted that it will be able to issue and redeem shares due to the funds’ conversion into an ETF.

When US regulators approve, Grayscale has always intended to turn the GBTC into an ETF, a spokeswoman for the company informed .

We firmly believe that transforming GBTC to an ETF is the optimal long-term product structure for GBTC and its shareholders, and we remain fully committed to doing so.

“At Grayscale, we aim to provide investors with a familiar, secure, and transparent way to engage in the constantly changing crypto industry. We value direct communication with our shareholders and respect their opinions regarding our product structures and business approach.

In the weeks following the failure of the now-bankrupt cryptocurrency exchange FTX, the difference between GBTC shares and Bitcoin widened to almost 50%.

GBTC current scenario:

Since reaching a high of $51.47 per share on November 12, 2021, the price of GBTC shares has been steadily decreasing. At the time of writing, the price per share was $8.76, according to Yahoo Finance.

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