Crypto investment firm Osprey Funds LLC has filed a lawsuit against crypto firm Grayscale Investments, claiming that it has misled investors through unfair and deceptive acts in the asset management industry.
More specifically, it claims Grayscale knew the application to convert GBTC to an ETF was never going to be approved by regulators.
The lawsuit, which was filed on Jan. 30 in Connecticut Superior Court, comes after Osprey’s founder and chief executive Greg King wrote an open letter to Barry Silbert, CEO of Digital Currency Group, which is the parent company of Grayscale Investments.
The letter, published earlier this month, said that Grayscale Bitcoin Trust requires “specific expertise and the truth of both regulators and all market participants.” But added that only Osprey was the best-positioned third party to manage GBTC because it has the trust that Grayscale doesn’t.
Grayscale, founded in 2013, has $14.6 billion in assets under management and charges a 2% annual management fee. Osprey, founded in 2018, which operates its own bitcoin trust, has around $64 million in AUM and charges a 0.49% fee.
“Grayscale also promotes its services as “transparent,” free of certain risks, “secure,” and supported by a “proven track record,” all of which are false and deceptive,” the lawsuit states.
Last year, Grayscale was seeking to convert GBTC to an ETF, and the company sued the U.S. Securities and Exchange Commission in June after it blocked GBTC from becoming an ETF.
The lawsuit by Osprey also contends that Grayscale’s treated the attempted conversion to an ETF as a “foregone conclusion, when it knew that access was never likely to happen.”
Osprey declined to comment.
A Grayscale spokeswoman described the lawsuit as “frivolous.”
“The conversion of GBTC to an ETF is the best long-term product structure for Grayscale’s investors, and approval of a spot Bitcoin ETF would directly benefit our industry peers,” the spokeswoman said in an email to MarketWatch. “At Grayscale, we remain confident in our common sense, compelling legal arguments, and we look forward to a final decision from the U.S. Court of Appeals by Fall 2023.”
In December, hedge fund Fir Tree Partners sued Grayscale for information to investigate potential mismanagement and conflicts of interest at its Bitcoin fund, according to a Bloomberg report.