Grayscale Under Scrutiny as Fir Tree Capital Files Lawsuit

• Fir Tree Capital Management sues Grayscale investments.
• The lawsuit is to gather information on potential mismanagement of its Bitcoin trust.
• Fir tree also wants to halt Grayscale’s move to convert its $10.7 billion Bitcoin trust to an ETF.

Grayscale Investments is being sued by Fir Tree for information in order to look into possible conflicts of interest and poor management at the company’s $10.7 billion Bitcoin fund. People familiar with the matter disclosed that Fir Tree wants to push Grayscale to provide discounts in the form of lowering fees and resuming redemptions.

Fir Tree also wants Grayscale to halt its efforts to convert its $10.7 billion Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF). The complaint also reveals that over 850,000 retail investors have been affected by Grayscale’s shareholder-unfriendly actions.

Data from Ycharts reveals that Grayscale’s Bitcoin trust shares are currently trading at a 43% discount to the net asset value of Bitcoin. This is primarily due to the fact that since there is no redemption program, the holders are unable to exit their positions. Holders are forced to sell it, as there is no means to exit.

Fir Tree also reveals that Grayscale is not allowing shareholders to redeem shares because it would cause a drop in profits. The hedge fund also wants to stop Grayscale from transforming its trust into an ETF.

Fir Tree’s lawyers stated in the complaint:

That strategy will likely cost years of litigation, millions of dollars in legal fees, countless hours of lost management time, and goodwill with regulators.

According to Bloomberg, the lawsuit was filed at the Delaware Court of Chancery, requesting information and documents related to its relationship with the Digital Currency Group.