Grayscale Crypto Firm Back in Hot Water as New GBTC Lawsuit Filed by Osprey Here’s What You Need to Know

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Source: Yanik Chauvin/Adobe

Grayscale, the digital asset management company that is part of Barry Silbert’s Digital Currency Group (DCG) crypto conglomerate, is in hot water after being sued by industry rival Osprey Funds for the way it promotes the Grayscale Bitcoin Trust (GBTC) fund.

In the lawsuit, filed Jan. 30 in Superior Court for the Judicial District of Fairfield in Connecticut, Osprey accused Grayscale of engaging in “unfair and deceptive acts and unfair competition” with its GBTC fund.

GBTC is an investment product that individual investors can purchase with their brokerage accounts. The product has served as a substitute for a spot bitcoin ETF in the United States, where no such ETF has yet been approved by the Securities and Exchange Commission (SEC).

Screenshot of a lawsuit filed in Superior Court for the Judicial District of Fairfield. Source: civilinquiry.jud.ct.gov

Grayscale has publicly stated that it intends to convert GBTC into a bitcoin-backed exchange-traded fund (ETF) once it receives the green light from regulators. It is this claim that is now at the center of the trial.

Osprey: Grayscale promoted ETF conversion as ‘lost conclusion’

According to Osprey, which sponsors competitor Osprey Bitcoin Trust (OBTC), Grayscale advertised GBTC as if a future ETF conversion was an “inevitable conclusion.” This, however, is far from the truth, Osprey claimed.

Converting the GBTC Bitcoin Trust into an ETF was “never likely to happen,” Osprey’s attorneys wrote in the lawsuit, while adding:

“Grayscale knew this message was false.”

Despite this, Grayscale waged “campaign after campaign” where it pushed the message that a conversion from GBTC to an ETF was “inevitable”, Osprey wrote.

Misleading advertising motive of dominant position

Osprey further claimed in the lawsuit that the “false and misleading advertising” in which Grayscale engaged was the main reason the company was able to achieve such a dominant position in the market.

The company said Grayscale has a market share of around 99.5%, despite charging “more than four times the asset management fees that Osprey charges for its services.”

GBTC’s annual fee is 2%, while OBTC charges 0.49% per year, according to the two companies’ websites.

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