DCG, short for Digital Currency Group, is charging 2% of the annual fee even though significant discounts have appeared in GBTC since February 2021. Investors are finding it hard to leave the network as redemption can only be claimed through the conversion to Exchange Traded Fund or dissolution.
The Securities & Exchange Commission has denied the chance of considering ETF, leaving, or dissolution as a last resort.
This comes amid 20% of shareholders showing up and signing up to vote to redeem the trust. David Bailey has $2 million in GBTC and has been seen citing that DCG sold fiction to Wall Street under the impression that they would still retain the control because the shares are widely distributed across 850k shareholders.
Several allegations have come out in public accusing Grayscale of not revealing the address as it would prove that Sec rule 144 Securities Act insider was violated on a massive scale. This allegation has been put forward by Zhu Su, the Founder of Three Arrows – now a defunct crypto hedge fund. Bailey agrees with the allegation and has received support from Cameron Winklevoss.
Winklevoss recently wrote an open letter to Barry Silbert highlighting that DCG and Genesis are beyond commingled. Andrew Redleaf from X3 capital has reportedly said that DCG/Genesis was aware of the insolvency of FTX and Alameda; however, Barry and DCG started to put pressure on Alameda to pay off the debt to Genesis worth $2.5 billion.
What makes the shareholder revolt less impacting is the fact that Bailey currently has an unclear plan, implying that the revolt has no legal standing. Chris Burniske from Placeholder VC has said that the Trust documents have zero legal leverage, and lawyers would know authoritatively. The signup site, too, has merely a single goal of bringing a change in the management and building a competitive bidding process for new trust sponsors.
Bailey is confident of winning the revolt, saying that if they were able to share details about those who have thrown their support behind the revolt, then it would cause global headlines.
Gemini Earn, meanwhile, has frozen funds worth $900 million because Genesis has halted withdrawals due to liquidity issues. Gemini is being sued by its own customers. There is speculation that Gemini could push Genesis into bankruptcy and maybe DCG. Assuming this actually happens, Gemini would still owe $900 million, an impossible task unless it brings an actual resolution.
The Winklevoss twins are worth $2 billion; however, if they would take up the responsibility of repaying the loans is yet to be seen. Estimates quote that the twins could give up half of their wealth to settle the demands and pursue the remainder from Genesis.DCG has been unable to come up with funds, thereby not being able to settle the demand of $1.6 billion raised by Genesis.