The FTX estate, which inherited the assets of the collapsed crypto exchange and hedge fund, has liquidated most of its stake in the Grayscale Bitcoin Trust (GBTC), which recently became a spot exchange-traded fund (ETF). The sale reportedly generated about $600 million for the estate, which is seeking to raise cash and settle debts.
The FTX estate was formed after the FTX exchange and its affiliated hedge fund, Alameda Research, filed for bankruptcy in October 2023, following a series of losses and lawsuits. The estate inherited the assets and liabilities of the defunct entities, including a large position in the GBTC, which was the largest and oldest Bitcoin fund in the US.
According to court documents, the FTX estate owned 22.28 million shares of the GBTC as of October 2023, worth about $902 million at the time. The GBTC was a trust that held Bitcoin on behalf of its investors, who could buy and sell its shares on the secondary market. However, the GBTC shares often traded at a significant discount or premium to the net asset value (NAV) of the underlying Bitcoin, depending on the supply and demand dynamics.
GBTC Converted to Spot ETF on January 11
On January 11, 2024, the GBTC was converted to a spot ETF, after receiving approval from the US Securities and Exchange Commission (SEC). This meant that the GBTC shares could now be redeemed for the actual Bitcoin by authorized participants, who are large institutional investors that can create and redeem ETF shares. This also meant that the GBTC shares would trade closer to the NAV of the Bitcoin, eliminating the discount or premium.
The conversion of the GBTC to a spot ETF was a long-awaited event for many investors, who had been waiting for a more efficient and transparent way to gain exposure to Bitcoin. The GBTC was the first Bitcoin fund to be converted to an ETF, following the SEC’s authorization of several spot Bitcoin ETFs in late 2023. The GBTC ETF now has about $23 billion in assets under management, making it the largest Bitcoin ETF in the US.
FTX Estate Sold More Than Two-Thirds of Its GBTC Shares
According to Bloomberg and CoinDesk, which cited sources familiar with the matter, the FTX estate sold more than two-thirds of its GBTC shares in the first three days of trading after the ETF conversion. The sale was executed by Marex Capital, a London-based broker-dealer that specializes in crypto and digital assets.
The sale of the GBTC shares fetched about $600 million for the FTX estate, which is seeking to raise cash and settle its debts with creditors and counterparties. The FTX estate had received court approval in November 2023 to sell its assets, including its GBTC holdings, in its reasonable business judgment.
The sale of the GBTC shares by the FTX estate also contributed to the massive outflows from the GBTC ETF in the past week. According to data from CoinShares, the GBTC ETF saw $2.2 billion of net outflows, overshadowing the inflows of $931 million and $860 million by its rivals BlackRock and Fidelity, respectively. Some analysts have suggested that investors are leaving the GBTC ETF due to its relatively high fees compared to other Bitcoin ETFs.
Alameda Research Dropped Lawsuit Against Grayscale
The FTX estate’s sale of the GBTC shares also coincided with the withdrawal of a lawsuit against Grayscale, the sponsor of the GBTC ETF, by Alameda Research. Alameda Research had sued Grayscale in March 2023, accusing it of charging excessive fees and imposing a self-imposed redemption ban that prevented shareholders from acquiring the Bitcoin held by the trust.
Alameda Research had argued that Grayscale was abusing its monopoly position in the Bitcoin fund market and harming its investors. However, Alameda Research dropped the lawsuit on January 22, 2024, without giving any reason. Grayscale had denied the allegations and said that it was always working to provide the best service and value to its investors.
