March 27, 2024
"Grayscale's Legal Win Advances Bitcoin ETF Goal Against SEC"
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Grayscale Investments Scores Legal Victory Over SEC in Pursuit of Bitcoin ETF

Crypto asset manager Grayscale Investments has achieved a significant triumph against the United States Securities and Exchange Commission (SEC) in its endeavors to transform its Grayscale Bitcoin Trust (GBTC) from an over-the-counter entity into a Bitcoin exchange-traded fund (ETF) that is listed on the stock exchange. Initially, the SEC turned down the GBTC proposal, citing concerns that the offerings lacked measures designed to prevent fraudulent and manipulative acts and practices. As a response, Grayscale took legal action, resulting in a reversal of the decision.

As per court documents filed on August 29, U.S. Court of Appeals Circuit Judge Neomi Rao issued an order in favor of Grayscale, granting their request for a review and nullifying the SEC’s refusal of the GBTC listing application. In a prior instance, Judge Rao had criticized the SEC for not providing a satisfactory explanation for its stance against Grayscale. Nevertheless, this ruling doesn’t guarantee the automatic listing of a grayscale spot Bitcoin ETF.

Michael Sonnenshein, the CEO of Grayscale, mentioned on X (formerly Twitter) that their legal team is presently engaged in a thorough analysis of the court’s viewpoint. On June 29, 2022, the SEC declined Grayscale’s bid to transform GBTC into an ETF.

The subsequent day, Donald B. Verrilli Jr., Grayscale’s senior legal strategist and former U.S. Solicitor General, submitted a formal appeal for reconsideration to the United States Court of Appeals for the District of Columbia Circuit. At that time, Sonnenshein expressed the company’s profound disappointment and strong disagreement with the SEC’s decision. Grayscale Bitcoin Trust stands as the largest Bitcoin fund traded over the counter, boasting assets under management exceeding $14 billion.

Earlier this year, the value of GBTC shares experienced a nearly 50% markdown compared to their net asset value due to ongoing legal battles with the SEC and concerns related to its parent company, Digital Currency Group (DCG).

In October 2022, Grayscale terminated significant agreements with its partner and digital currency broker, Genesis Global. Subsequently, on November 16, 2022, Genesis Global halted withdrawal activities, attributing the move to unprecedented market turmoil caused by the collapse of the cryptocurrency exchange FTX. The firm also suffered setbacks due to the failure of Singaporean crypto hedge fund Three Arrows Capital, which resulted in an outstanding debt of $1.2 billion owed to Genesis. In January 2023, reports emerged revealing that DCG owed creditors a sum exceeding $3 billion and was exploring the possibility of selling a venture capital portfolio valued at $500 million. Notably, Genesis Global was accountable for a substantial debt of $900 million owed exclusively to participants of the cryptocurrency exchange Gemini’s Earn program.

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