Digital asset manager Osprey Funds has filed a lawsuit against Digital Currency Group (DCG) subsidiary company Grayscale Investment for allegedly publicizing misleading adverts about its Grayscale Bitcoin Trust (GBTC).
According to Osprey Funds, Grayscale kept advertising the fact that its GBTC would be converted to an Exchange Traded Fund (ETF) even after its application had been rejected by the United States Securities and Exchange Commission (SEC).
“Grayscale launched campaign after campaign to convince participants in the markets, including their investment advisors, to engage Grayscale’s asset management services by telling them that a conversion to an ETF was inevitable, and thus Grayscale’s services would provide the only avenue offering benefits of such asset management services with access to an ETF structure,” Osprey analyzed. “Grayscale knew that this message was false.”
Osprey Funds, which recently laid off a few of its staff, termed this action by Grayscale “unfair and deceptive acts and unfair competition.” In addition to the promises about the GBTC conversion, Grayscale also pledged transparency, level of risk, and security all of which it had not been able to meet up with, according to its smaller rival Osprey Funds.
Markedly, Osprey seems to be the only competitor that Grayscale has in terms of the type of Bitcoin (BTC) trust it offers. Exclusively, Grayscale commands almost 99.5% of the BTC trust market leaving Osprey Funds with only 0.5% even while charging “more than four times the asset management fee” The latter attributed this huge market control to the unfair trade practices in which Grayscale Investment has been involved.
A Grayscale representative said “The lawsuit filed by Osprey Funds against Grayscale Investments is frivolous. The conversion of GBTC to an ETF is the best long-term product structure for Grayscale’s investors, and approval of a spot Bitcoin ETF would directly benefit our industry peers.”
Grayscale Files Legal Action Against SEC
Meanwhile, Grayscale has filed its first legal brief against SEC for rejecting its application to list a spot BTC ETF. The American digital currency asset management company claimed that about 850,000 of its existing shareholders were affected by the decision of the SEC. Instead, the U.S. regulator responded with a 73-page brief defending its action.
The SEC explained that there was “no inconsistency in the Commission’s disapproval of Grayscale’s spot ETP despite having approved two CME bitcoin futures ETPs.”