US Congressman Brad Sherman questioned the Securities and Exchange Commission (SEC) about whether Grayscale Bitcoin Trust investors (GBTC) can buy back their assets from the investment company.
In a May 11 letter addressing SEC Chairman Gary Gensler, the congressman claimed that Grayscale prioritized profits regardless of how it affected the more than 850,000 retail investors whose assets are currently tied up in GBTC.
“Grayscale has marketed itself as a way for private investors to invest in bitcoin and share in its financial growth without worrying about the security and storage issues associated with owning cryptocurrencies outright.”
According to the congressman, Grayscale’s decision to issue more GBTC shares played a major role in the stock trading at more than 40% off its net asset value. According to Ycharts data, the discount is down to 39.76% at the time of going to press.
Sherman noted that these actions caused concerns for thousands of GBTC investors, adding that SEC intervention was necessary for investor protection.
Meanwhile, Grayscale had rejected investors’ requests to allow redemptions, citing Regulation M. The rule prohibits companies from simultaneously selling and redeeming the same security.
Sherman posed several questions to the SEC about Regulation M and whether it was still a barrier to shareholder buybacks. His other questions bordered on Grayscale’s lack of an independent director on the board and whether the 2% Bitcoin-based fee was high.
The legislator has asked the financial supervisor to answer these questions before 15 May.
Community welcomes intervention
The letter generated mixed opinions from the crypto community, with some describing it as a welcome development. However, several others criticized Sherman, viewing the letter as another sign of FUD — citing his past anti-crypto stance.
The lawmaker had previously described Bitcoin holders as tax evaders and has maintained strong anti-crypto rhetoric in its interventions across the space.
Meanwhile, the letter gives Grayscale another headache. The company is battling the SEC over its refusal to approve the conversion of its BTC trust into a spot ETF.
In addition, parent company Digital Currency Group is in a financial mess due to one of its subsidiaries – Genesis – filing for bankruptcy on January 19.
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