In a notable development in the crypto industry, Alameda Research, affiliated with the FTX exchange, has decided to voluntarily dismiss its lawsuit against Grayscale Investments, following the green light for a Bitcoin exchange-traded fund (ETF) by regulators.
Litigation Abandoned Post ETF Approval
Alameda Research, which operated under the FTX umbrella prior to its bankruptcy, had initiated legal proceedings against Grayscale Investments, a subsidiary of the Digital Currency Group (DCG). However, documents filed on January 22 indicate that Alameda has retracted its legal challenge. This move closely aligns with the Securities and Exchange Commission’s (SEC) approval of a spot BTC ETF, a decision that has significant implications for the crypto market.
The Crux of the Lawsuit
The lawsuit, which was lodged in March of the previous year, accused Grayscale of implementing unfair policies that effectively barred redemptions of the Grayscale Bitcoin Trust (GBTC), allegedly trapping over $9 billion in value from FTX’s estate. John J. Ray III, who took the helm of FTX after Sam Bankman-Fried’s resignation, had sought injunctive relief to unlock assets for creditors and cover operational costs.
Grayscale’s Stance Vindicated
A spokesperson for Grayscale confirmed the withdrawal and suggested that Alameda’s decision reinforces the asset manager’s assertion that the lawsuit lacked a solid legal foundation. Grayscale had previously contested the allegations, maintaining that Alameda had no standing to sue.
Regulatory Shifts and Market Dynamics
The SEC’s recent nod to spot Bitcoin ETFs enabled Grayscale to transition its flagship GBTC fund into an ETF backed by Bitcoin. Following the SEC’s authorization on January 10, private data referenced by CoinDesk indicated that FTX had liquidated approximately 22 million GBTC shares, leading to significant outflows from Grayscale’s fund.
In a related legal victory, Grayscale won a lawsuit against the SEC, compelling the commission to reconsider its previous rejections of spot Bitcoin ETFs. The court deemed the SEC’s actions inconsistent, especially given its prior approvals of Bitcoin futures ETFs.
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