Grayscale Investments and Grayscale Bitcoin Trust have engaged in "deceptive acts and unfair competition" in the asset management business, Osprey Funds alleged in a complaint filed in Connecticut Superior Court Monday.
In addition to trust sponsor Grayscale Investments, the Delaware Trust Company, as the trustee of the trust, was also named as a defendant. Since roughly late 2020 to the present, Grayscale has made "false and misleading" statements via its advertising and promotion to the effect that "turning its Bitcoin asset management services into access to a Bitcoin ETF was a foregone conclusion, when it knew that access was never likely to happen," Osprey Funds' complaint said.
Osprey is the only other asset manager that provides services in the "marketplace of opportunities for trust-based products offering ticker-based exposure to Bitcoin," its complaint said.
"Only because of its false and misleading advertising and promotion has Grayscale been able to maintain to date approximately 99.5% market share in a two-participant market despite charging more than four times the asset management fee that Osprey charges for its services," Osprey's complaint said.
Due to its unfair trade practices, Grayscale's assets under management are several billion dollars more than they should be in the two-player market for such asset management services, Osprey's complaint alleged.
Osprey is seeking relief including compensatory damages in an amount to be proven at trial; disgorgement of the defendants' proceeds stemming from the alleged unfair and deceptive trade practices; and a preliminary and permanent order enjoining the defendants from engaging in the alleged unfair and deceptive practices.
In an emailed statement Monday, a Grayscale spokeswoman called Osprey's suit "frivolous."
"The conversion of GBTC to an ETF is the best long-term product structure for Grayscale's investors, and approval of a spot Bitcoin ETF in the United States would directly benefit our industry peers," the spokeswoman said, referring to the trust by its ticker symbol.
Grayscale is currently suing the Securities and Exchange Commission over the regulator's denial of an application to convert GBTC into a spot bitcoin ETF.
"At Grayscale, we remain confident in our common sense, compelling legal arguments, and we look forward to a final decision from the D.C. Court of Appeals by fall 2023," the Grayscale spokeswoman said.