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Collapsed crypto hedge fund Alameda Research has dropped its lawsuit against Bitcoin fund manager Grayscale, clearing the way for the failed crypto brand’s new management to selling shares in its recovery fund, a lawyer working on retrieving customer funds confirmed to Decrypt.
Alameda last March sued Grayscale—which ran the Grayscale’s Bitcoin Trust (GBTC)—in a bid to unlock investments that it said were improperly withheld from its customers.
Since Alameda’s affiliate crypto brand FTX went bankrupt in November 2022, its new management has been working hard to get back customers’ lost cash.
But the lawsuit—which alleged that Grayscale had an “improper redemption ban”—was dropped today, a Monday court filing shows.
Grayscale responded by saying that “Alameda’s voluntary dismissal underscores Grayscale’s position that this legal action was entirely without merit.”
GBTC began trading on the New York Stock Exchange as an exchange-traded fund (ETF) earlier this month. Before, it operated like a closed-end fund, meaning it was difficult for customers to redeem their funds and cash out.
Since its conversion to a Bitcoin spot ETF, however, investors have been fast cashing out shares. Last week, billions of dollars were redeemed, leading to a plunge in the price of Bitcoin (BTC).
FTX was once a big and respected crypto brand that included an exchange people could use to buy, sell and bet on the future price of digital assets.
But it quickly and unexpectedly went bust in November 2022 after it was criminally mismanaged. Alameda Research was a sister company of FTX.
Its disgraced ex-CEO and co-founder Sam Bankman-Fried—who also co-founded Alameda Research—was found guilty of seven fraud and conspiracy charges last year.
FTX’s new management has since been working on getting back money for clients who lost out when the exchange collapsed.