Alameda Sues Grayscale: $1.3B in Funds Held Unlawfully

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• Alameda Research is suing Grayscale for allegedly holding investments and not paying customers what they are owed.
• The lawsuit claims that Grayscale has an “improper redemption ban” in place, which prevents customers from accessing their funds.
• Grayscale has denied the allegations, claiming they are seeking regulatory approval to convert GBTC into an ETF.

Alameda Sues Grayscale Over Funds

Alameda Research – an affiliate of the now defunct FTX crypto exchange – is suing Grayscale, the world’s largest bitcoin trust. The company alleges that Grayscale is unlawfully holding investments and refuses to unlock them so customers can receive due payments.

Background of the Dispute

The dispute stems from a controversy several months ago when it was alleged Sam Bankman-Fried – who runs both Alameda and FTX – used customer funds from FTX to pay off loans taken out by Alameda. This was an illegal move given he used funds that were not his and fused both firms together through transacting or money exchanging. In addition, 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.

Alameda’s Claims Against Grayscale

John J. Ray III – the new CEO of FTX and man overseeing its bankruptcy proceedings – says Grayscale has an „improper redemption ban,“ preventing customers from getting funds they’re rightfully owed: „FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscales’s actions.“ He added that Grayscale has extracted over $1.3 billion in exorbitant management fees in violation of trust agreements.

Grayscale’s Response

A spokesperson for Grayscale has denied these allegations, claiming they are „misguided“: „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 Graycsale’s investors.“

FTX Bankruptcy

FTX went bankrupt last November after Bankman-Fried announced online that his company was experiencing a liquidity crunch, needing fast cash to stay afloat. It then emerged Three Arrows Capital had placed many shares in Grawscale but were unable to recover any cash when it sought financial trouble recovery later on