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The US Securities and Exchange Commission (SEC) rejected Grayscale’s application to convert a Grayscale Bitcoin Trust (GBTC) vehicle into spot Bitcoin, and Grayscale has now opted to sue the SEC in court. “We have filed a lawsuit against the SEC,” said SEC Chairman Michael Sonnenshein.
There are new developments regarding this issue. Let’s explore.
Grayscale v SEC Trial Prepared
The court order filed on January 23 states that the court will hear arguments from both sides on March 7. Grayscale had anticipated that the oral arguments would begin in the second quarter. The action may have been sparked by Genesis Capital, a sister company to Grayscale and cryptocurrency lender, which filed for Chapter 11 bankruptcy last week. Due to the bankruptcy of FTX, Genesis stopped withdrawing, redemption and making new loans.
Since the bankruptcy of cryptocurrency exchange FTX, Genesis has experienced significant drawdowns and significant liquidity problems. Genesis also has $175 million of its own locked up in FTX due to its crash and bankruptcy. Genesis Global has suggested a roadmap for exiting through Chapter 11 bankruptcy, which provides a framework for global settlement and trust to distribute assets to its creditors.
Why Is Genesis Bankruptcy To Blame?
After the Genesis bankruptcy, investors’ concerns about widening the GBTC discount rate increased. GBTC now has $14.5 billion in assets under management and a negative premium rate of 41.5%.
The management and sponsorship of the Grayscale Bitcoin Trust has been proposed for a takeover by Valkyrie Investments and Osprey Funds (GBTC). According to the company, shareholders will have better options for reduced management fees and redemption schemes.
Community Reaction
The community has reacted to this and called it great. The fact that it was being prepared meant that it was an urgent matter and could not wait.
The SEC has come under fire from many due to its recent lawsuits. Some also claim that it concentrates on trivia rather than what really matters.
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