Bitcoin investors are preparing a major coup

1 year ago
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Like Valkyrie, Osprey called on Grayscale to drop its sponsorship and act as a replacement. IN open letterOsprey CEO Greg King vowed to cut management fees by 75 percent, begin a buyout program immediately, and cooperate with regulators instead of litigation.

The Fir Tree and Osprey lawsuits were called by Jennifer Rosenthal, Grayscale’s vice president of communications, “baseless” and “frivolous,” respectively. “We remain firmly convinced that converting GBTC to an ETF is the best long-term product structure for investors and are 100 percent committed to it,” she says.

As it stands, the various parties have reached an impasse; Grayscale says it’s not going anywhere and remains confident in the strength of its case against the SEC, while activists grapple with how to take the firm down.

Meanwhile, according to Parish, the situation threatens to escalate into a mud-slinging contest as Grayscale tries to get through this difficult period.

Converting to an ETF too quickly isn’t necessarily in Grayscale’s best interest, he says, because the recent negative press surrounding DCG and its subsidiaries (the lending arm of one of its subsidiaries, Genesis, filed for bankruptcy in January) will likely cause investors to run for exits at the first opportunity, taking millions of dollars with them in management fees.

“The whole Grayscale strategy here is to limit the buyout and then PR, PR, PR. And to fight legal battles in any field in which they have to fight, ”says Parish.

Sonnenschein disputes the idea that activation of redemption will trigger an exodus of customers, arguing that a “regulated, battle-tested” ETF structure will attract an even larger audience and even more capital into bitcoin. He also says that converting the trust into an ETF was the plan from the beginning. “This is what investors want and deserve,” he says.

If the court rules against Grayscale and the company exhausts all remaining legal avenues to appeal, Sonnenschein says, she make a tender offer at the same time, part of the shares is redeemed from shareholders at a price set taking into account the “fairness of investors”.

But RedeemGBTC and Fir Tree do not share Grayscale’s convictions about the strength of their case against the SEC, which the pair describe as “doomed” and “wasteful” respectively, and point to the need for an urgent resolution to the situation.

“If we thought Shades of Gray would succeed, [in converting GBTC to an ETF]we wouldn’t try to stop it. We just don’t think it’s going to happen, so something needs to be done,” Bailey says.

Three other shareholders say they think the ETF is unlikely to be approved as long as Gary Gensler, current SEC chairman, remains in charge. (Gensler’s term ends in 2026.) The SEC declined to comment.

“They [Grayscale] they’re going to fight back and fight to the very end, but that doesn’t bode well for them,” says McClurg. “Financial services is a trust game; when your customers lose faith, you will never get them back. In the long run, I think they’re done.”

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