FTX Affiliate Alameda Research Drops Grayscale Lawsuit

FTX liquidators are scrapping a costly legal battle to secure money for FTX creditors, following GBTC's conversion into a spot bitcoin ETF.

AccessTimeIconJan 22, 2024 at 5:47 p.m. UTC
Updated Mar 8, 2024 at 8:19 p.m. UTC

FTX sister firm Alameda Research has dropped its lawsuit against Grayscale Investments following the conversion of its flagship trust product into an exchange-traded fund (ETF), a new court filing shows.

The lawsuit, filed last March, alleges more than $9 billion in investor funds became trapped in Grayscale's Bitcoin Trust (GBTC), following the collapse of FTX. The complaint formed part of wider efforts to retrieve and "maximize" recoveries for FTX customers whose funds were funds lost by, or locked on, the failed cryptocurrency exchange and its affiliates' platforms. The suit also alleged Grayscale had excessively high fees. Monday's filing did not provide a reason for Alameda dropping the suit.

Grayscale CEO Michael Sonnenshein, Grayscale parent company Digital Currency Group (DCG) and DCG CEO Barry Silbert – all defendants in the original suit – were also dropped in Monday's filing.

FTX faces 36,075 customer claims for a total of $16 billion, the Wall Street Journal reported. It also owes roughly $3.1 billion to its top 50 corporate creditors, a bankruptcy filing from 2022 shows.

"Alameda's voluntary dismissal underscores Grayscale's position that this legal action was entirely without merit," a Grayscale spokesperson said.

GBTC, the world's largest bitcoin investment pool, became an exchange-traded fund earlier this month, following a landmark Securities Exchange Commission (SEC) approval of the first-of-its-kind investment vehicle.

GBTC holders were unable to easily exit their positions while the product was a trust. Following its conversion to an ETF, around $2.8 billion flew out of GBTC as of last week.

The dismissal came shortly after FTX dumped more than $1 billion in shares of GBTC, CoinDesk first reported, citing the firm's internal documents and sources familiar with the matter.

Bitcoin was trading at $40,419, down roughly 3% in the past day, as of the time of writing on Monday, according to CoinDesk's Bitcoin price index.

UPDATE (Jan. 22, 2024, 18:05 UTC): Notes that Grayscale and DCG figures were also dropped.

Edited by Nikhilesh De.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Elizabeth Napolitano

Elizabeth Napolitano was a news reporter at CoinDesk.