Fir Tree Capital Management has filed a lawsuit against Grayscale Investments demanding information that could be used to force changes to the way it operates the main Bitcoin Trust.
According to Bloomberg, a December 6 complaint filed against Grayscale in the Delaware Chancery Court sought Grayscale to lower its fees, initiate refunds, and deliver documents related to its relationship with the Digital Currency Group.
The hedge fund also wants to stop Grayscale’s efforts to convert $10.7 billion of Grayscale Bitcoin Trust (GBTC) into a spot exchange fund (ETF).
In its complaint, the New York-based hedge fund said about 850,000 retail investors were “harmed by the unfriendly actions of Grayscale shareholders.”
Shares in Grayscale’s Bitcoin fund are currently trading at a record discount of approximately 43% to the net asset value (NAV) of its underlying digital asset, Bitcoin, according to data from Ycharts.
A large part of the reason is due to the fact that GBTC holders have no way of exiting their GBTC positions except to sell them to another market participant, as they offer no fiat or crypto redemption software.
The Spruce claims that Grayscale’s redemption bar, which dates back to 2014, is “self-imposed,” and claims that Grayscale refuses to redeem shares because that would cut dividends.
The company also wants Grayscale to stop trying to convert the trust into an ETF which it has tried to do over and over over a number of years without success.
“This strategy will likely cost years of litigation, millions of dollars in legal fees, countless hours of wasted management time, and goodwill with regulators,” Fair Tree attorneys said in the complaint. “All the while, Grayscale will continue to charge fees from the fund’s diminishing assets.”
However, Grayscale has maintained that converting the funds into an ETF is what will allow it to create and redeem shares.
A spokesperson for Grayscale told Cointelegraph that it had always planned to convert GBTC into an ETF when allowed by US regulators.
“We remain 100% committed to converting GBTC into an ETF, as we strongly believe this is the best long-term product structure for GBTC and its shareholders.”
“At Grayscale, our mission is to help investors access the ever-evolving crypto ecosystem through investment vehicles that are familiar, secure, and transparent. We respect the opinions of our shareholders, and value engaging with them directly on the details of our product structures and operating model.”
Related: Grayscale Legal Officer Says Bitcoin ETF Litigation Could Take Two Years
The gap between GBTC stocks and Bitcoin increased to nearly 50% in the weeks following the collapse of now-bankrupt cryptocurrency exchange FTX.
Shares in GBTC have been on a gradual decline for about a year since they peaked at $51.47 per share on November 12, 2021, with a share price of $8.76 at the time of writing, according to Yahoo Finance.
