Grayscale faces lawsuit from rival Osprey over long-awaited ETF conversion
As seen in a Connecticut court filing, digital asset manager Grayscale faces lawsuits from a much smaller competitor, Osprey Fund. January 30th.
According to Osprey, Grayscale falsely promised to transform the Grayscale Bitcoin Trust (GBTC) into a Bitcoin spot exchange-traded fund (ETF).
Osprey said that Grayscale portrayed the result as “a foregone conclusion,” even though the conversion might not occur. Osprey also complained about his Grayscale promises regarding transparency, level of risk, and security. He said these claims the company made in its advertising and promotions were “false and deceptive.”
Grayscale acts are considered unfair competition. Osprey claimed that Grayscale controls his 99.5% of the market for certain types of Bitcoin trusts. Osprey, which claims to be the only other participant in that market, attributes Grayscale’s overwhelming success to its unfair practices, saying it lost revenue.
Grayscale itself is based in Delaware. However, Osprey and Grayscale Bitcoin Trust are based in Connecticut, and competition between the two is increasing.
The validity of Osprey’s appeal will depend in part on Grayscale’s ability to convert GBTC into a Bitcoin spot ETF. In recent years, the U.S. Securities and Exchange Commission (SEC) has rejected his ETF proposals from Grayscale and a number of other companies, despite Grayscale’s efforts to move forward with his ETF conversion plans.
Grayscale said it is awaiting a decision from the DC Court of Appeals that could overturn the SEC’s earlier denial of Osprey’s allegations. If a judge rules in Grayscale’s favor, the development should allow the company to launch its first Bitcoin ETF. .
Grayscale went on to call the Osprey lawsuit “frivolous.” It suggests that pursuing ETFs yields the best results for investors and competitors.
This is at least the second lawsuit of its kind. Fir Tree Capital Management filed a lawsuit in Delaware in December over Grayscale’s alleged mismanagement of his GBTC.
Grayscale Bitcoin Trust is currently underperforming and is trading at a significant discount even considering its recent gains. They cannot be redeemed.
