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Grayscale victorious in SEC lawsuit over Bitcoin ETF review

Grayscale Investments emerges victorious in its legal battle against the United States Securities and Exchange Commission (SEC) regarding the conversion of its Grayscale Bitcoin Trust (GBTC) into a listed Bitcoin exchange-traded fund (ETF).

The SEC had previously rejected Grayscale’s application, citing concerns about fraudulent practices.

However, Grayscale filed a lawsuit and has now successfully overturned the SEC’s decision.

On August 29, the U.S. Court of Appeals Circuit Judge Neomi Rao granted Grayscale’s petition for review and vacated the SEC’s order to deny the GBTC listing application.

Judge Rao had previously criticized the SEC for not providing a sufficient explanation for its rejection.

It’s important to note that while this decision is a significant win for Grayscale,

it does not guarantee the eventual listing of a Grayscale spot Bitcoin ETF.

Michael Sonnenshein, the CEO of Grayscale, stated on X (formerly Twitter) that their legal team is actively reviewing the court opinion,

indicating that further actions or considerations may be taken in response to the ruling.

On June 29, 2022, the Securities and Exchange Commission (SEC) dealt a blow to Grayscale by rejecting its application to convert the Grayscale Bitcoin Trust (GBTC) into a spot ETF.

The following day, Grayscale’s senior legal strategist, Donald B. Verrilli Jr., a former U.S. Solicitor General,

filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit.

Responding to the SEC’s decision, Grayscale expressed deep disappointment and vehement disagreement.

With over $14 billion in assets under management, the Grayscale Bitcoin Trust is the largest Bitcoin fund traded over-the-counter.

However, earlier this year, GBTC shares traded at a significant discount of nearly 50% to the net asset value due to ongoing litigation with the SEC and concerns about the creditworthiness of its parent company,

Digital Currency Group (DCG).

In October 2022, Grayscale terminated crucial agreements with its partner and digital currency broker, Genesis Global.

Subsequently, on November 16, 2022, Genesis Global suspended withdrawals,

citing market turmoil triggered by the collapse of cryptocurrency exchange FTX.

Additionally, the firm faced challenges stemming from the failure of Singaporean crypto hedge fund Three Arrows Capital,

which left Genesis with unpaid debts totaling $1.2 billion.

In January 2023, it was revealed that DCG is burdened with over $3 billion in debt to creditors and is contemplating the sale of a $500 million venture capital portfolio.

Notably, Genesis Global alone owes $900 million to users of the cryptocurrency exchange Gemini’s Earn program, further exacerbating the financial strain.

Grayscale’s journey has been marked by regulatory hurdles, legal battles, and financial setbacks, underscoring the complexities and challenges faced by prominent players in the cryptocurrency industry.

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