Osprey Funds Sues Grayscale Over “Unfair Business Practices”

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  • Osprey Funds has sued Grayscale over the way it has advertised its GBTC fund
  • Osprey alleges that Grayscale treated a Bitcoin ETF conversion as a foregone conclusion, when in fact it knew this was unlikely
  • Osprey runs its own fund and says that Grayscale has unfairly taken business away from itself and others

Digital asset manager Osprey Funds has sued its rival Grayscale Investments over false advertising claims regarding the Grayscale Bitcoin Trust (GBTC). The complaint, filed in a Connecticut court, alleges that Grayscale falsely advertised GBTC as a foregone conclusion regarding its conversion to a spot Bitcoin ETF, despite knowing it was unlikely. This, Osprey claims, gave Grayscale an unfair advantage and allowed it to dominate 99.5% of trust-based crypto products, despite charging higher fees. Grayscale is currently involved in a legal battle with the Securities and Exchange Commission (SEC) over the issue.

Grayscale Knew Bitcoin ETF Was “Unlikely”

Grayscale launched its Bitcoin vehicle in 2013 and made a big play of its intentions to convert to a Bitcoin ETF, a process it started in April 2021, but this was rejected last year. It sued the SEC over the decision on the day it was rejected, and according to the Osprey Funds lawsuit the company fully expected this outcome, causing damage to its rivals, including Osprey.

Grayscale has hit back at these claims of “unfair trade practices”, telling Bloomberg that converting GBTC to an ETF is the best option for investors in the long run and that approval of a spot Bitcoin ETF would benefit the industry. Grayscale remains confident in their legal arguments and expects a decision from the DC Court of Appeals by fall 2023.

Osprey Says Grayscale Unfairly Attracted Customers

Osprey has previously criticized GBTC’s 41% discount and announced a desire in January to become a sponsor of the product and enact changes to narrow the gap and reduce its 2% management fee, which is four times higher than Osprey’s. Grayscale customers would welcome such a move, with many signing up to a motion to liquidate the fund having not been able to withdraw their funds ever since it opened for business, thanks to the lack of a Bitcoin ETF.