New York-based hedge fund Fir Tree Capital Management has filed a lawsuit against crypto investment firm Grayscale Investments, asking the court to oblige the firm to buyback shares of Grayscale Bitcoin Trust (GBTC), which are now trading at a 43.6% discount.
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According to a report from Bloomberg, Fir Tree wants Grayscale to resume redemptions as the crypto investment giant had issued too many shares, but didn't buy back any of them. People familiar with the matter say that Fir Tree also wants to downsize the discount by lowering fees. The hedge fund says Grayscale harmed its 850,000 clients with its "shareholder-unfriendly actions."
Fir Tree also wants Grayscale to abandon a legal battle with the US Securities and Exchange Commission (SEC) as the financial regulator earlier refused to permit the conversion of GBTC into an exchange-traded fund. Grayscale says the conversion is the only way to redeem shares, but the hedge fund thinks that this litigation "will likely cost years of litigation, millions of dollars in legal fees, countless hours of lost management time."
In March 2022, Grayscale CEO, Michael Sonnenschein, emphasized that its number one priority for the firm is to convert its GBTC fund into an ETF. He also added that the SEC has created an "unfair playing field and forced investors into a futures-based ETF because it's the only product that exists."
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