Grayscale Crypto Firm In Hot Water Again As New GBTC Lawsuit Filed By Osprey – Here’s What You Need To Know

Digital asset management firm Grayscale, part of Barry Silbert’s cryptocurrency conglomerate Digital Currency Group (DCG), has been sued by industry rival Osprey Funds over how it promoted its Grayscale Bitcoin Trust (GBTC) fund. After that, I am in a predicament.

In a lawsuit filed January 30 in Superior Court for the Fairfield Judicial District in Connecticut, Osprey accused Grayscale of engaging in “unfair and deceptive conduct and unfair competition” with the GBTC Fund.

GBTC is an investment product that retail investors can purchase in their brokerage accounts. This product serves as a replacement for spot Bitcoin ETFs, for which no such ETF has yet been approved by the U.S. Securities and Exchange Commission (SEC).

Grayscale has publicly stated its intention to convert GBTC into a Bitcoin-backed Exchange Traded Fund (ETF) once it receives regulatory approval. It is this allegation that is currently at the center of the lawsuit.

Osprey: Grayscale promoted conversion to ETF as ‘forgot the conclusion’

According to rival Osprey Bitcoin Trust (OBTC) sponsor Osprey, Grayscale is promoting GBTC as if its future conversion to an ETF is a “foregone conclusion”. But this is far from the truth, Osprey argued.

Attorneys for Osprey said in the lawsuit that conversion of the GBTC Bitcoin Trust to an ETF is “unlikely”, adding:

“Grayscale knew this message was false.”

Nonetheless, Grayscale has run “one campaign after another,” pushing the message that a conversion from GBTC to ETFs is “inevitable,” Osprey wrote.

Dominant Position False Advertising Reasons

In the lawsuit, Osprey further alleges that “false and misleading advertising” in which Grayscale has been involved is a key reason why the company has achieved such a dominant position in the market.

The company said it has about a 99.5% market share, even though Grayscale charges “more than four times the asset management fee that Osprey charges for its services.”

According to the websites of both companies, GBTC has an annual fee of 2% and OBTC has an annual fee of 0.49%.