Recently, United States Congressman, Brad Sherman, representing California's 32nd Congressional District addressed an important letter to the U.S. Securities and Exchange Commission (SEC), Chairman Gary Gensler, in the hopes of prompting the regulator's attention to the suspicious business strategies of the cryptocurrency management firm, Grayscale Investments. The Congressman particularly focused on Grayscale Bitcoin Trust (GBTC) which a share of the company's trust fund services.
Congressman Sherman's letter relayed the concerns voiced by many investors in the pursuit of answers from Grayscale regarding its refusal to redeem GBTC shares, despite halting the issue of new shares. Specifically, the letter mentioned the 42% discount at which the GBTC shares were trading, despite the fact that Grayscale investors have been unable to redeem theirs since the aforementioned halt of new shares.
The lawmaker maintained that by refusing to honor redemptions, Grayscale could be artificially increasing its own assets under management as a way of kicking back against the SEC's Regulation M, which is an anti-market manipulation measure that makes simultaneous sales and redemptions of the same security illegal. This then allows the firm to reap money through its 2% management fees which, accoridng the Congressman, amounted to $615 million in 2021.
The congressman also questioned the involvement of Grayscale's parent company Digital Currency Group (DCG) in the alleged manipulation of GBTC's discount, as well as the firm's aspirations of converting GBTC into a spot Bitcoin ETF. The letter also asked Gary Gensler if the SEC has a role in protecting GBTC's investors.
Given the gravity of the situation, it is now the SEC's duty to investigate the legitimacy of the claims, to safeguard the interests of cryptocurrency investors and to identify Grayscale's real motivation behind the manipulation of its share pricings. It is ultimately hoped thatthe SEC's efforts will once again restore the faith of investors in cryptocurrency.
Ivanna Patel
- 2023-05-12
Congressman Urges US SEC to Probe Grayscale's Business Strategies
Rep. Brad Sherman has addressed a letter to the U.S. Securities and Exchange Commission (SEC), Chairman Gary Gensler, to investigate the suspicious business strategies of the cryptocurrency management firm, Grayscale Investments.
