FTX's $1 Billion Sell-Off Prompts Outflows from GBTC

FTX’s $1 Billion Sell-Off Prompts Outflows from GBTC

Time Stamp: January 22, 2024 11:49 AM
FTX's $1 Billion Sell-Off Prompts Outflows from GBTC PlatoBlockchain Data Intelligence. Vertical Search. Ai.

Following the approval of spot Bitcoin exchange-traded funds (ETFs), the
crypto market has experienced a surprising downturn after FTX unloaded a staggering
$1 billion worth of Grayscale Bitcoin Trust’s (GBTC) shares.

This unprecedented sell-off, attributed to
the bankruptcy of the crypto exchange, has raised a concern about the broader implications
for the crypto sector. According to a report by Coindesk, FTX is a significant
contributor to the outflows amounting to more than $2 billion reported by GBTC.

CoinDesk‘s data review unveiled that FTX
disposed of 22 million shares, accounting for nearly $1 billion of the overall
outflow. Despite high expectations surrounding the approval of Bitcoin ETFs,
the crypto market has experienced a decline in Bitcoin’s price.

FTX leveraged the price difference between GBTC and
the value of the underlying Bitcoins. Holding 22.3 million GBTC valued at $597
million in October 2023, FTX’s move to liquidate its stake at $900 million
coincided with the launch of Grayscale’s Bitcoin ETF on January 11. The aftermath saw a drop in Bitcoin’s value,
prompting a reevaluation of the impact of the approval of the ETFs.

Last year, Alameda Research sued Grayscale to recover $250 million for FTX’s customers and creditors.
This legal tussle involves accusations of exorbitant fees and Grayscale’s alleged ban on redemption.

Alameda Research’s Grievances against Grayscale

FTX asserted that Grayscale violated
trust fund agreements by levying over $1.3 billion in management fees over the
last two years. Additionally, the exchange claimed that Grayscale hindered
shareholders from redeeming their shares, resulting in a significant drop in
the value of the Grayscale Bitcoin and Ethereum Trusts.

However, Grayscale countered these
allegations, labeling the lawsuit “misguided”. According to a report
by Finance Magnates, a spokesperson from Grayscale defended the company’s
efforts to obtain regulatory approval for converting the Grayscale Bitcoin
Trust into an ETF.

Meanwhile, a US federal appeals court recently mandated the appointment of an independent bankruptcy examiner for FTX. This
occurred following the alleged misappropriation of $10 billion in customers’
assets.

Justifying its decision, the 3rd US
Circuit Court of Appeals in Philadelphia emphasized the mandatory nature of
appointing an independent examiner under the US Bankruptcy Code. However, FTX’s current CEO, John Ray,
and the committee of unsecured creditors opposed this step, citing concerns
about duplication of efforts and high costs that could diminish funds available
for distribution.

Following the approval of spot Bitcoin exchange-traded funds (ETFs), the
crypto market has experienced a surprising downturn after FTX unloaded a staggering
$1 billion worth of Grayscale Bitcoin Trust’s (GBTC) shares.

This unprecedented sell-off, attributed to
the bankruptcy of the crypto exchange, has raised a concern about the broader implications
for the crypto sector. According to a report by Coindesk, FTX is a significant
contributor to the outflows amounting to more than $2 billion reported by GBTC.

CoinDesk‘s data review unveiled that FTX
disposed of 22 million shares, accounting for nearly $1 billion of the overall
outflow. Despite high expectations surrounding the approval of Bitcoin ETFs,
the crypto market has experienced a decline in Bitcoin’s price.

FTX leveraged the price difference between GBTC and
the value of the underlying Bitcoins. Holding 22.3 million GBTC valued at $597
million in October 2023, FTX’s move to liquidate its stake at $900 million
coincided with the launch of Grayscale’s Bitcoin ETF on January 11. The aftermath saw a drop in Bitcoin’s value,
prompting a reevaluation of the impact of the approval of the ETFs.

Last year, Alameda Research sued Grayscale to recover $250 million for FTX’s customers and creditors.
This legal tussle involves accusations of exorbitant fees and Grayscale’s alleged ban on redemption.

Alameda Research’s Grievances against Grayscale

FTX asserted that Grayscale violated
trust fund agreements by levying over $1.3 billion in management fees over the
last two years. Additionally, the exchange claimed that Grayscale hindered
shareholders from redeeming their shares, resulting in a significant drop in
the value of the Grayscale Bitcoin and Ethereum Trusts.

However, Grayscale countered these
allegations, labeling the lawsuit “misguided”. According to a report
by Finance Magnates, a spokesperson from Grayscale defended the company’s
efforts to obtain regulatory approval for converting the Grayscale Bitcoin
Trust into an ETF.

Meanwhile, a US federal appeals court recently mandated the appointment of an independent bankruptcy examiner for FTX. This
occurred following the alleged misappropriation of $10 billion in customers’
assets.

Justifying its decision, the 3rd US
Circuit Court of Appeals in Philadelphia emphasized the mandatory nature of
appointing an independent examiner under the US Bankruptcy Code. However, FTX’s current CEO, John Ray,
and the committee of unsecured creditors opposed this step, citing concerns
about duplication of efforts and high costs that could diminish funds available
for distribution.

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