FTX Sues Grayscale Investments Over Redemption Ban

03/07/2023 20:02 • AI & Tech Insights • 69 views

According to reports, FTX, the bankrupt cryptocurrency exchange, said that its affiliate Alameda Research had filed a lawsuit against Grayscale Investments, the cryptocurrency asset management company, to implement the “redemption ban”, which may cash more than 250 million dollars in assets for the customers of the bankrupt cryptocurrency exchange.

Alameda Research filed a lawsuit against Grayscale to enforce the “redemption ban”

Interpretation of the news:

FTX, a bankrupt cryptocurrency exchange, has taken legal action against Grayscale Investments, a cryptocurrency asset management company. The lawsuit has been filed by FTX affiliate Alameda Research with the aim to implement the “redemption ban,” which could enable FTX customers to cash out more than $250 million worth of assets held by the cryptocurrency exchange.

The Redemption Ban refers to a clause that is included in the Grayscale Investment’s Trust offering documents, which prevents funds from being redeemed for at least six months after their subscription, and then only once a year. The company implemented this rule to ensure that it has enough time to accumulate the necessary amount of cryptocurrency to back its holdings, which is largely buys from the open market.

According to reports, FTX’s customers are seeking redemption of their investments in Grayscale Investment’s Bitcoin Trust. As the assets are locked up under the Redemption Ban, they are not able to withdraw their funds as yet. Alameda Research’s injunction, however, aims to overturn this ban, allowing FTX customers to retrieve their assets.

Alameda Research’s lawsuit claims that Grayscale has violated the US Federal Trade Commission act by participating in deceptive investment practices. The complaint mentions that Grayscale has not provided its investors with any disclosures or sufficient information about the redemption ban, intentionally withholding crucial information related to the assets they hold. This violates the FTC and US Securities and Exchange Commission rules, which require adequate disclosures for investor protection.

In conclusion, FTX’s lawsuit against Grayscale Investments aims to revoke the Redemption Ban, which will allow customers to retrieve their investments. The motivation behind the lawsuit stems from customers’ demands to withdraw their assets held in the Grayscale Investment’s Bitcoin Trust. Finally, the lawsuit alleges that Grayscale Investments has violated FTC and SEC rules by withholding essential disclosures and misleading its investors.

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FTX Sues Grayscale Investments Over Redemption Ban

Alameda Research filed a lawsuit against Grayscale to enforce the “redemption ban”

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