Funds have successfully been withdrawn, FTX withdraws lawsuit against Grayscale

FTX's affiliate company Alameda Research announced the withdrawal of the lawsuit against Grayscale Investments, as per the document. This comes as a new development after Grayscale's trust product transformed into an Exchange-Traded Fund (ETF).

FTX, the plaintiff, sued Grayscale seeking reduced management fees and allowing redemption of shares.

Why did FTX file a lawsuit initially?

Last March, FTX alleged in its complaint that over the past two years, Grayscale had violated the trust agreement by collecting over $1.3 billion in "excessive management fees." At the same time, it claimed that Grayscale Trust improperly prevented shareholders from redeeming shares, resulting in the trust's stock trading at a discount of about 50% to its net asset value. If Grayscale were to reduce fees and stop the improper redemption blocks, the value of FTX's stake in the trust would be at least $550 million more, representing an increase of about 90%.

However, with GBTC having successfully transitioned into an ETF that allows for free share redemption, the significance of this lawsuit appears to have diminished.

Grayscale CEO Michael Sonnenshein, parent company Digital Currency Group DCG, and DCG CEO Barry Silbert were also defendants in the Monday filing, which has now been withdrawn. A Grayscale spokesperson stated, "Alameda's voluntary dismissal highlights that this legal action was entirely without merit."

FTX's Financial Troubles and GBTC's Rebirth

According to The Wall Street Journal, FTX is facing a total of $16 billion in claims from 36,075 customers. Additionally, bankruptcy documents from 2022 reveal that FTX owes its top 50 corporate creditors about $3.1 billion.

GBTC, the world's largest Bitcoin investment fund, transitioned into an ETF this month. When GBTC was still a trust product, holders found it difficult to exit their positions. Since becoming an ETF, approximately $2.8 billion has flowed out of GBTC as of last week.

GBTC continues to face selling pressure, and the downward trend in Bitcoin prices may not see a turnaround until late March.

GBTC Sees Outflow of $640 Million on the Seventh Day

FTX's Actions and Market Response

Shortly before the withdrawal of the lawsuit, FTX reportedly sold over $1 billion worth of GBTC shares, according to internal documents of the company and sources. This move may be part of FTX's efforts to recover funds for its creditors and has contributed to recent volatility in the Bitcoin market.

Bitcoin fell below $40,000 this morning, is it due to FTX dumping GBTC shares?

As FTX continues to address its financial troubles, industry observers and investors are closely monitoring every liquidation-induced fluctuation.