Grayscale won the case against Osprey Funds for unfair trading practices in Connecticut, but Osprey now requests that the decision be reexamined.
In its $2 million unfair trade lawsuit against Grayscale Investments over the asset manager’s Bitcoin fund, Osprey Funds has requested that a Connecticut state court judge reconsider his ruling to award Grayscale Investments a victory.
Osprey Funds claimed that Judge Mark Gould’s decision from February 7 arrived “before the close of discovery” and broadened the scope of an exemption under the Connecticut Unfair Trade Practices Act in a move for reargument submitted to the Superior Court of Connecticut on February 10.
Osprey Funds filed a lawsuit against Grayscale and Delaware Trust Company in January 2023, alleging that the trustee of its flagship spot Bitcoin BTC$98,388 exchange-traded fund (ETF) had deceptively promoted the Grayscale Bitcoin Trust (GBTC), enabling it to dominate the market.
Osprey Funds asserted in its lawsuit that Grayscale made converting its trust into an ETF seem like “a foregone conclusion, even though it knew that access was never likely to happen.”
In his decision on February 7, Judge Gould agreed with Grayscale, who stated that Osprey’s lawsuit contained allegations of purchasing and selling securities excluded from the statute.
Osprey and Grayscale “were the only two asset managers in the marketplace of opportunities for trust-based products offering ticker-based exposure to Bitcoin” at the time of Osprey’s lawsuit, he decided.
Following its legal defeat against Grayscale, the Securities and Exchange Commission authorized GBTC’s conversion to an ETF in January 2024, a year after the lawsuit began. Grayscale refused to accept Osprey’s July 2024 offer to resolve its claims against it for slightly under $2 million.
In its motion filed on February 10, Osprey claimed that Judge Gould’s decision failed to consider the distinctions between the FTC’s and Connecticut courts’ approaches to misleading advertising and the FTC’s and courts’ approaches to securities transactions governed by Connecticut and federal securities laws.
Osprey wrote, “The Decision implicitly applied the limited implied exemption from CUTPA for claims based on securities transactions’ to claims arising from deceptive advertising between competitors simply because they do business in the securities, asset management, or cryptocurrency industries.”
It further stated that Osprey Funds and Grayscale had not engaged in “any securities transaction’ with each other” and that its allegations did not relate to a securities transaction “being deemed fraudulent, deceptive, or otherwise actionable between the parties to it.”
“Instead, Osprey’s allegations center on how much market share was taken away from Osprey by Grayscale’s unfair competition, which was founded on misleading advertising,” the firm’s attorneys stated.
Following the collapse of a deal to be bought by rival Bitwise, Osprey announced plans with the SEC last month to turn its Osprey Bitcoin Trust (OBTC) into a spot Bitcoin ETF.
