GBTC case: Judge reviews SEC for bitcoin spot and bitcoin ETP futures

On June 29, Donald B. Verrilli, Jr., a partner at Munger, Tolles & Olson, filed a motion to review the SEC ruling with the United States Court of Appeals for the District of Columbia on Grayscale’s behalf. In its October 11 opening statement, Grayscale alleged that the SEC arbitrarily treated the proposed Bitcoin spot ETP differently from the Bitcoin futures ETP.

Judge Neomi Rao, a member of the three-judge panel that heard oral arguments in the case on Tuesday, asked Emily True Paris, senior SEC appellate counsel, that if the court sided with Grayscale, would the SEC approve the spot Bitcoin product or not? back to futures product approval.

Ms. Pariset replied that she could not say what the commission would do.

Earlier in the trial, Judge Rao asked about an SEC ruling regarding the Teucrium Bitcoin futures fund.

“What about the fact that the commission in the Teucrium order recognizes that futures prices are affected by spot prices?” Judge Rao asked, adding that in approving futures ETPs, the panel concluded that any fraud in the spot market could be adequately dealt with by the fact that the futures market is regulated. According to her, the SEC came to this conclusion just a few months before it denied spot Bitcoin ETPs.

Ms. Paris said she doesn’t think the SEC reached that conclusion in the Teucrium order.

She pointed to the connection in the Teucrium situation between the underlying futures market and the regulated market, with which the exchange has entered into a joint control agreement.

Separately, Alameda Research on Monday filed a lawsuit against Grayscale Investments and other defendants in the Delaware Court of Chancery.

“This lawsuit arises from the defendants’ brazen abuse of their control of nearly $19 billion of digital assets held in two trusts to enrich themselves at the expense of the trust’s shareholders,” Alameda’s complaint reads.

The complaint states that Alameda is a shareholder in both trusts. Alameda was previously part of a cryptocurrency hedge fund and trading venture run by Sam Bankman-Freed, the statement said, but is now a debtor who has filed for Chapter 11 bankruptcy relief.

In addition to Grayscale, Alameda’s lawsuit also includes Grayscale CEO Michael Sonnenschein, Digital Currency Group and Barry Silbert as defendants. The complaint states that Mr. Silbert is the founder and CEO of DCG, Grayscale’s parent company.

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