FTX advances bankruptcy proceedings with major Grayscale Shares sale

Alameda Research, an affiliate of the now-defunct cryptocurrency exchange FTX, has withdrawn its lawsuit against Grayscale Investments. This development follows the recent transformation of Grayscale’s Bitcoin Trust (GBTC) into an exchange-traded fund (ETF). The initial lawsuit, filed in March, revolved around allegations that over $9 billion in investor funds were trapped in GBTC, exacerbated by the collapse of FTX. The complaint also criticized Grayscale for its high management fees.

Impact of GBTC’s ETF status on the crypto market

GBTC, which stands as the world’s largest bitcoin investment pool, transitioned into an ETF earlier this month. This move, greenlit by the Securities Exchange Commission (SEC), marked a significant milestone for cryptocurrency-based investment vehicles. As a trust, GBTC holders faced challenges in liquidating their positions. However, the conversion to an ETF format has led to substantial activity, with approximately $2.8 billion exiting GBTC last week alone. This liquidity event coincides with FTX’s decision to liquidate more than $1 billion in GBTC shares, a move that is part of its ongoing bankruptcy proceedings.

FTX bankruptcy saga continues

The saga of FTX’s bankruptcy continues to unfold, impacting various facets of the cryptocurrency world. FTX, which declared bankruptcy in November 2022, faces a staggering number of customer claims. According to the Wall Street Journal, these claims amount to $16 billion, with the exchange also owing about $3.1 billion to its top 50 corporate creditors.

The decision to sell off its holdings in Grayscale’s ETF is seen as a strategic step to address these financial obligations. Meanwhile, the broader cryptocurrency market is experiencing volatility, with Bitcoin’s value showing a decline to $40,419, a 3% decrease in the past day.

In summary, the withdrawal of Alameda Research’s lawsuit against Grayscale signals a new chapter in the FTX saga, highlighting the intricate connections between various entities in the cryptocurrency landscape. The conversion of GBTC into an ETF has not only affected the dynamics of investment in digital assets but has also played a pivotal role in the ongoing bankruptcy proceedings of FTX.