Osprey Funds recently filed a lawsuit against the operator of the largest Bitcoin trust in the world, Grayscale Investments.
The digital asset manager claimed that the company had misrepresented the possibility of the trust becoming an exchange-traded fund (ETF) in the future.
A rival Bitcoin trust by the name of OBTC is also operated by Osprey and it said so in the documents that it filed in the Superior Court in Connecticut.
It has alleged in the filing that Grayscale was engaged in deceptive and unfair acts, which had resulted in unfair competition in the industry.
It stated that Grayscale had advertised its Bitcoin Trust (GBTC) in a manner that its conversion into a Bitcoin ETF had been a ‘foregone conclusion’ at some point down the road.
Grayscale has certainly made efforts into converting its GBTC into an ETF, but like a number of other companies, has also been turned down by the US Securities and Exchange Commission (SEC).
The regulatory agency has not given its approval for launching a Bitcoin ETF in the US so far. Grayscale has not backed down from the fight against the SEC and called its reasoning ‘illogical’.
According to Osprey, Grayscale managers had been aware that it was not likely that they would be able to provide investors with access to a Bitcoin ETF.
The lawsuit alleges that multiple campaigns had been launched by the asset manager for convincing investors that it would inevitably convert GBTC into an ETF.
It said that the message had been false and the misleading and false advertisement was the only reason that Grayscale managed to scan a 99.5% share in the market, where the only other player is Osprey.
The lawsuit alleged that due to the unfair trade practices that Grayscale had adopted, Osprey had had to suffer losses in terms of profit and management fees.
Osprey’s lawyers also said that the damages awarded to the company should be based on the fees and profits that it has missed out on because of the conduct of Grayscale.
A spokeswoman for Grayscale said that the lawsuit that Osprey Funds had filed against the company was frivolous at best.
She said that the best long-term product structure for investors of Grayscale was the conversion of their trust into a Bitcoin ETF and the industry peers would also benefit if a spot Bitcoin ETF is approved in the US.
The spokeswoman also said that they were confident of their common sense and legal arguments and were looking forward to a decision in the fall by the D.C. Court of Appeals.
The CEO and founder of Osprey, Greg King, had also written an open letter earlier this month to Barry Silbert, the head of DCG, which is Grayscale’s owner.
In the letter, he argued that Osprey should be allowed to take over the GBTC as a sponsor. He said that while Osprey and Grayscale both had the skills for managing GBTC, only the former had the trust.