By George Ward
According to reports, Congressman Brad Sherman has raised concerns regarding the ability of investors in Grayscale Bitcoin Trust (GBTC) to redeem their assets from the investment company. He sought clarification from the Securities and Exchange Commission (SEC) on why investors still struggle to withdraw their funds from the platform.
Lawmaker Seeks Answers
On May 11, Congressman Brad Sherman wrote a letter to SEC Chair Gary Gensler, inquiring whether investors in the Grayscale Bitcoin Trust (GBTC) could redeem their assets from the investment firm. In the letter, the Congressman accused Grayscale of prioritizing profits over the interests of over 850,000 retail investors who currently have their assets stuck with the Bitcoin investment platform.
He further alleged that Grayscale’s decision to issue more GBTC shares contributed to the shares trading at a significant discount of over 40% less than its net asset value, which could negatively impact investors. While data shows that there has been a slight improvement in the shares’ value, the Congressman expressed concerns about the potential consequences for investors.
Sherman raised concerns about the impact of Grayscale’s actions on GBTC investors and urged the SEC to intervene to protect their interests. Grayscale, however, has declined investors’ requests to allow redemptions, citing Regulation M, which bars simultaneous sales and redemptions of the same asset.
This has left the assets of over 850,000 GBTC investors trapped in the investment vehicle as the shares continue to trade at a significant discount to their net asset value. One of the issues raised was the lack of redemptions for GBTC investors and whether Regulation M was still a barrier.
Additionally, Sherman questioned Grayscale’s lack of an independent director on its board and the high 2% fee charged to investors. These issues are seen as critical for investor protection and require SEC intervention.
Crypto Community Comment
The letter from the lawmaker to the regulator regarding GBTC has garnered diverse reactions from the crypto community. Some viewed it as a positive step towards investor protection, while others criticized Sherman.
The critics cited his past anti-crypto stance and considered the letter as spreading Fear, Uncertainty, and Doubt (FUD). In the past, Congressman Sherman has been known for his critical view towards cryptocurrencies, often referring to Bitcoin holders as potential tax evaders.
While commenting on the aftermath of the FTX collapse, Sherman acknowledged the impact of the financial losses on the macroeconomy. He stressed the need to understand the “management failures” that led to the collapse and respond appropriately.
Then, he expressed his belief that the collapse of FTX has vindicated his skepticism towards the crypto industry. Hence, he called on the SEC to take swift action to prevent similar incidents from happening in the future.
The recent letter to the SEC adds to Grayscale’s existing challenges. The company has been engaged in a prolonged dispute with the SEC regarding converting its Bitcoin trust to a spot ETF. But the financial watchdog is yet to approve the request.
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