Osprey Funds, a digital asset manager, filed a lawsuit against Grayscale Investments in the Superior Court of Connecticut on January 30, alleging violation of the state’s Unfair Trade Practices Act. The lawsuit concerns Grayscale’s advertising and promotion of the Bitcoin (BTC) exchange-traded fund (ETF) it intends to create.
Osprey claims in the lawsuit that it is the only competitor to Grayscale in the over-the-counter Bitcoin fiat asset management market, and that Grayscale has maintained its leadership position by making false claims:
“Only through its false and misleading advertising and promotion has Grayscale been able to date to maintain approximately 99.5% market share in a two-party market despite charging more than four times the asset management fee that Osprey charges for their services.”
Specific, Osprey alleged that Grayscale promoted participation in its Grayscale Bitcoin Trust (GBTC) as a means of accessing a spot Bitcoin ETF through the conversion of its $12 billion GBTC. Grayscale presented the conversion as “a foregone conclusion, when it knew access was never likely to occur,” according to the lawsuit.
Osprey alleged that Grayscale continued to call the conversion “‘probable,'” despite knowing that such a description was false, as the SEC had consistently rejected the possibility of such a conversion for a Bitcoin commodity fund since late 2020 or earlier. “. Osprey claimed that statements in emails, press releases and Twitter, as well as television appearances by Grayscale executives, contained false information.
Dear @BarrySilbertI have an idea for $GBTC. Give me a buzz when you’re ready. We’re just up the road from you in Connecticut. pic.twitter.com/zVFHBLxSl0
—Greg King, CFA (@GregKingOsprey) January 13, 2023
The United States Securities and Exchange Commission officially denied Grayscale’s request to convert its GBTC into an ETF on June 29, 2022. Grayscale filed a petition for review with the District of Columbia Court of Appeals the same day. The court is expected to hear arguments in the case on March 7.
Grayscale is part of the Digital Currency Group, which also owns Genesis Global Capital, the cryptocurrency lender that filed for bankruptcy on January 19. Osprey has also fallen on hard times recently. Apparently, she’s laid off 15 employees since last summer, which leaves it with a staff of less than 10 people. Osprey is seeking damages and injunctive relief from Grayscale.
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