Grayscale Investments, a renowned crypto asset management firm, has secured a significant win over the United States Securities and Exchange Commission (SEC). The victory comes in its pursuit to transform its over-the-counter Grayscale Bitcoin Trust (GBTC) into a Bitcoin exchange-traded fund (ETF). The SEC had previously declined the GBTC application, claiming it wasn’t sufficiently equipped to “prevent fraudulent and manipulative acts and practices.” This decision was contested by Grayscale and has now been reversed.
Court documents from August 29 reveal that U.S. Court of Appeals Circuit Judge Neomi Rao mandated the approval of Grayscale’s review request and the SEC’s prior decision to decline the GBTC listing be set aside. Judge Rao had pointed out that the SEC failed to clarify why Grayscale’s application was flawed. It should be noted, however, that this ruling doesn’t ensure that Grayscale’s Bitcoin ETF will be ultimately listed.
Michael Sonnenshein, Grayscale’s CEO, shared on X (previously Twitter) that the company’s legal team is diligently examining the court’s findings.
🚨 JUST IN 🚨
— Sonnenshein (@Sonnenshein) August 29, 2023
The D.C. Circuit ruled in favor of @Grayscale in our lawsuit challenging the SEC's decision to deny $GBTC's conversion to an ETF!
Thank you to everyone who has been on this journey with us, especially our investors. We are grateful for your support and…
It was on June 29, 2022, when the SEC turned down Grayscale’s endeavor to transition GBTC into a spot ETF. A day later, Donald B. Verrilli Jr., Grayscale’s top legal advisor and ex-U.S. Solicitor General, sought a review from the U.S. Court of Appeals for the District of Columbia Circuit. At that juncture, Sonnenshein expressed the company’s profound discontent and strong disagreement with the SEC’s resolution.
As an over-the-counter traded entity, Grayscale Bitcoin Trust stands as the premier Bitcoin fund, overseeing more than $14 billion. Earlier this year, the GBTC shares were priced nearly 50% less than the actual net asset value. This was attributed to Grayscale’s ongoing legal tussle with the SEC and concerns surrounding the financial stability of its parent company, Digital Currency Group (DCG).
Fast forward to October 2022, Grayscale ended crucial contracts with its ally and cryptocurrency broker, Genesis Global. In the subsequent month, due to a meltdown in the cryptocurrency exchange FTX, Genesis Global halted withdrawals. Additionally, the fall of Singapore’s crypto hedge fund, Three Arrows Capital, impacted the firm, leaving an unsettled debt of $1.2 billion to Genesis.
Come January 2023, it was revealed that DCG is in debt of over $3 billion and contemplates selling a $500 million venture capital portfolio. Genesis Global, on its part, owes a staggering $900 million to the participants of the Gemini cryptocurrency exchange’s Earn scheme.
