• FTX Derivatives Exchange has filed a $9 billion lawsuit against Grayscale Investments.
• The lawsuit seeks to unlock value for shareholders of the Grayscale Bitcoin and Ethereum Trusts.
• The move could potentially fuel massive liquidations that could upset the market.
FTX Files Lawsuit Against Grayscale
FTX Derivatives Exchange has filed a billion-dollar lawsuit against Grayscale Investments, the largest trust provider in the crypto ecosystem. FTX and its sister firm Alameda Research are seeking an injunctive relief to unlock $9 billion or more in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts.
FTX Bankruptcy & Creditors
FTX, led by its Founder and former Chief Executive Officer Sam Bankman-Fried, filed for bankruptcy last November and locked up more than $8 billion in assets belonging to more than 100,000 creditors. Since then, FTX has been trying to find funds wherever it can with proposed sales such as Ledger X, Embed Technologies, FTX Europe, and FTX Japan all pending approval.
Accusations Against Grayscale
The new lawsuit is yet another attempt by FTX to free up some funds. According to the announcement, FTX accuses Grayscale of charging exorbitant management fees totaling more than $1.3 billion over two years as well as tactically preventing investors from being able to redeem their trust which caused the shares to trade at a 44% discount to net asset value (NAV). If successful in court, FTX expects potential payouts of up to $550 million from reduced management fees and access granted by Grayscale for users to access their trusts again.
Maximizing Recoveries for Creditors
John J Ray III, Chief Executive Officer & Chief Restructuring Officer had this to say regarding FTX’s goals: „We will continue to use every tool we can to maximize recoveries for FTX customers and creditors.“ He continued “Our goal is to unlock value that we believe is currently trapped within these trusts.“
Potential Crypto Crash?
The outcome of this legal battle remains uncertain but if successful it could help bolster reserves at FTX while simultaneously freeing up billions of dollars worth of assets on the market – something which could potentially trigger a crypto crash given enough liquidity flowing into or out of the ecosystem suddenly..