As Pensions & Investments has reported, "numerous investors" in the trusts have signaled their willingness to participate in Alameda's litigation including Fir Tree Partners, 210K Capital, UTXO, Owl Creek Asset Management, Aristides Capital, ProChain Capital, and "dozens of other investment managers and individuals," Alameda's amended complaint said.
As part of its original complaint, Alameda, a chapter 11 debtor in possession that was previously part of Sam Bankman-Fried's cryptocurrency enterprise FTX, sought "hundreds of millions of dollars" in damages as well as an injunction requiring Grayscale to reduce its sponsor's fees "consistent with its obligations under the Trust Agreements," Alameda's first amended verified complaint said.
However, Grayscale argued that Alameda can't seek such relief unless shareholders representing 10% of all the shares in each trust join the lawsuit as co-plaintiffs, Alameda's amended complaint said.
In a May 19 brief filed in support of their motion to dismiss Alameda's complaint, defendants Grayscale Investments and Grayscale CEO Michael Sonnenshein argued that Alameda's claims based on the sponsor's fees "are derivative and are therefore barred."
The Delaware Statutory Trust Act allows a beneficial owner of a statutory trust to bring a derivative action in the name of the trust "if it makes a demand that is rejected or demand would be futile," Grayscale's brief said. However, the act allows a trust to set forth additional requirements that a stockholder-plaintiff must comply with in order to be able to proceed derivatively in the trust's name, Grayscale's brief said.
"Here, the Trust Agreements do just that," Grayscale's brief said.
While investors in the trusts have signaled their willingness to participate in Alameda's litigation, "However, for reasons unrelated to the merits of the claims, insufficient shareholders have come forward to date in order to surmount Grayscale's asserted 10% threshold," the amended complaint said. "Consequently, Alameda does not assert herein shareholder derivative claims regarding Defendants' misconduct with respect to the Sponsor's Fees."
Alameda's amended complaint however does include substantial allegations "relating to that misconduct as it is relevant to show Defendants' bad faith with respect to their decision not to offer redemptions," it said.
In addition, Alameda continues to confer with shareholders about their willingness to join the litigation, the amended complaint said.
"It may later seek leave to amend this pleading to add additional plaintiffs and its meritorious claims regarding Defendants' egregious Sponsor's Fees," the amended complaint said.
