York-based hedge fund fir tree capital management has filed a lawsuit against digital asset manager grayscale investments, alleging potential mismanagement and conflicts of interest. the lawsuit is in response to grayscale’s issuance of an immense number of shares in its bitcoin fund without providing investors with means of exiting their positions other than selling shares to other investors. fir tree is attempting to stop grayscale from converting gbtc into a spot bitcoin exchange-traded fund (etf).
Lawsuit was filed in february of last year, with the trust’s shares falling to a 40% discount last month. around 850,000 retail investors have been “harmed by grayscale’s shareholder-unfriendly actions,” according to the complaint by fir tree’s lawyers. fir tree is a hedge fund managing $3 billion.
Lawsuit is alleging that grayscale’s redemption bar, introduced in 2014, is “self-imposed” and there is no legal reason preventing gbtc investors from converting their positions into fiat. the strategy to stop grayscale would be costly and time consuming, according to the complaint. grayscale has chosen to take legal action against the securities and exchange commission (sec) to convert its bitcoin fund into an sec-approved etf and has hired donald b. verrilli, jr., former solicitor general of the united states, and law firm davis polk & wardwell to support the firm’s campaign. fir tree is seeking documents that could be used to pressure grayscale to reduce the annual 2% management fee and resume redemptions. grayscale has stated that they are “100% committed to converting gbtc to an etf.”