Hedge Fund Fir Tree Files “Books and Records” Complaint Against Grayscale
According to a recent report, hedge fund Fir Tree is suing Digital Currency Group’s Grayscale. Reportedly, the aim of the complaint is to force Grayscale to reduce fees and resume redemptions. Additionally, Fir Tree is allegedly seeking to prevent DCG’s Bitcoin Trust from converting into a spot BTC exchange-traded fund.
Fir Tree Sues Grayscale
Reportedly, the complaint filed by Fir Tree in Delaware is a “books and records” action. The hedge fund is demanding that Grayscale discloses information primarily concerning Grayscale Bitcoin Trust (GBTC). Allegedly, the goal is to compel DCG’s BTC trust to change course in several important ways.
Fir Tree claims Grayscale collected $615.4 million last year in fees charged at 2%. One of the goals of the hedge fund is to reduce this number. Furthermore, Fir Tree allegedly believes there is no legal basis for Grayscale to prevent its investors from exiting the trust. Instead, the hedge fund alleged that the real reason for refusing to redeem shares is that it would cut into profits.
According to the report, Fir Tree also wants to prevent Grayscale from turning into a spot Bitcoin ETF and to reduce or eliminate the current trading discount. GBTC has been trading at a discount compared to the price of BTC throughout most of 2022 with the discount being above 42% by mid-November.
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Grayscale and the Digital Currency Group
One of the possible reasons why Fir Tree is allegedly suspecting mismanagement and conflict of interest within Grayscale is its connections to Barry Silbert’s Digital Currency Group. Certain companies owned by the DCG have been hit hard by FTX contagion, and there is widespread speculation on the health of associated firms.
DCG’s Genesis Lending was forced to freeze withdrawals after FTX filed for bankruptcy. Furthermore, a report from November indicated that initial efforts to raise rescue funds met with failure. On the other hand, a company spokesperson stated they are having “very positive conversations” with investors, and Silbert himself sent a reassuring letter to stakeholders predicting $800 million in revenue this year.
Around the same time, it was disclosed that Genesis also hired restructuring advisers that arose from the issues stemming from FTX’s collapse. Still, it is important to remember that it isn’t clear whether the problems with Genesis are affecting Grayscale or the wider Digital Currency Group, and that Grayscale itself announced it is unaffected.
Do you think Grayscale should stop trading at a discount? Let us know in the comments below.