Grayscale, the SEC & Genesis with Michael Sonnenshein

Feb 24 2023 • 1hr 22m

Show Notes

“A lot of regulators all around the world are looking to see how US regulators treat Bitcoin…I would say that anybody who is broadly involved in the crypto space, you want to see Grayscale win this lawsuit.”— Michael SonnensheinMichael Sonnenshein is the CEO of Grayscale. In this interview, we discuss Grayscale’s lawsuit with the SEC, Genesis’s lending practices and bankruptcy, GBTC and the intercompany relationships at DCG. - - - - The Grayscale Bitcoin Trust (GBTC) brought institutional investment into Bitcoin and helped Bitcoin to mature. Launched in 2013, as a subsidiary of the Digital Currency Group (DCG), it was devised as an official means of gaining exposure to Bitcoin for high-net-worth entities. Many, including Grayscale, have sought to provide a spot price ETF, but, in the absence of SEC approval, GBTC has served as an attractive alternative investment vehicle. In November 2021, GBTC had over $43 billion AUM. GBTC is one of many funds Grayscale provides covering a plethora of digital assets, including Ethereum, Solana, Zcash and Bitcoin Cash. However, GBTC is the most dominant: at this moment GBTC represents nearly 75% of Grayscale's total AUM. With its 2% annual fee based on Bitcoin’s spot price, GBTC is a valuable part of Grayscale and DCG's portfolio. At the current Bitcoin price, GBTC commands approximately $420m in fees.Grayscale is currently dealing with some major issues. Since early 2021 GBTC has been trading below its net asset value (NAV). This discount is currently hovering around all-time lows at 46%. GBTC holders cannot redeem their shares for the underlying asset. They have to sell their shares in an open market and shoulder this discount. Those not forced to sell feel effectively trapped. Grayscale is subject to a number of investor lawsuits, and an activist campaign seeking to unseat Grayscale as the manager of GBTC. Concurrently, Grayscale is suing the SEC over the latter's refusal to convert GBTC into an ETF. The mechanisms of an ETF allow for arbitrage trading keeping the share price aligned with NAV. This is Grayscale’s strategy for reducing the current GBTC discount. Grayscale has also been caught up in the bankruptcy of the crypto lending firm Genesis, another subsidiary of DCG. According to a Financial Times report, DCG is selling shares in Grayscale funds, “at a steep discount” to pay back Genesis creditors. There are more fundamental questions about the role of Genesis’s lending. According to Bitcoinist, the failed hedge fund Three Arrows Capital took a $2.36 billion loan from Genesis backed by 17 million GBTC shares.- - - - This episode’s sponsors:Gemini - Buy Bitcoin instantlyLedn - Financial services for Bitcoin hodlersBitcasino - The Future of Gaming is hereLedger - State of the art Bitcoin hardware walletCasa - The leading provider of Bitcoin multisig key securityWasabi Wallet - Privacy by default-----WBD623 - Show Notes-----If you enjoy The What Bitcoin Did Podcast you can help support the show by doing the following:Become a Patron and get access to shows early or help contributeMake a tip:Bitcoin: 3FiC6w7eb3dkcaNHMAnj39ANTAkv8Ufi2SQR Codes: BitcoinIf you do send a tip then please email me so that I can say thank youSubscribe on iTunes | Spotify | Stitcher | SoundCloud | YouTube | Deezer | TuneIn | RSS FeedLeave a review on iTunesShare the show and episodes with your friends and familySubscribe to the newsletter on my websiteFollow me on Twitter Personal | Twitter Podcast | Instagram | Medium | YouTubeIf you are interested in sponsoring the show, you can read more about that here or please feel free to drop me an email to discuss options.

Activity

@petar

250,000 sats

Mar 16 2023

Peter is going to need a bigger pair of trousers with balls this big, ...seriously wow!

@marks

50,000 sats

Feb 28 2023

thank you for performing a strong interview

@firneisnxirbajanaicj

30,000 sats

Feb 25 2023

Big respect for doing this. It sounds like Peter and the team are really taking their viewers experiences to heart. I'm very glad to see such hard questioning put forward to people like Michael who have a clear role in the shit that happens throughout crypto.

@vmvd1898

2,100 sats

Mar 16 2023

⚡️

@daumebtb

1,000 sats

Feb 25 2023

Well done Peter. He certainly looked like he wouldn't take it to his heart but you did the right thing!

@sartoshi

1,000 sats

Feb 24 2023

He knows.

@andyflattery

500 sats

Feb 25 2023

I didn’t think that highly of grayscale but thought Barry would be at least a little compelling

@dputts

500 sats

Feb 26 2023

thank you for having the uncomfortable conversation

@orangepillapp

500 sats

Feb 27 2023

best WBD episode by far. 🔥

@maksimus

500 sats

Feb 24 2023

Great Interview

@semioclasm

500 sats

Feb 26 2023

Second time listening to this banger. This time round I was very aware of how brilliantly obsequious and sycophantic Peter was at the start. It led to Michael being expansive and rather boastful about just how significant and important he was to the activities of the business. Then the hammer drops. Brutal.

@josephjoeyjoe

210 sats

Mar 16 2023

this fool is slimy

@blizzah

200 sats

Feb 25 2023

value 4 value

@fomomatronic

101 sats

Feb 25 2023

hillarious

@stupleb

100 sats

Feb 24 2023

well done here

@rtroitino

100 sats

Feb 25 2023

Thanks for giving this guy the hard time he deserved

@aphex3k

100 sats

Feb 27 2023

Sonnenschein is giving me Machinsky and Fried vibes

@sat_nakamoto

100 sats

Feb 25 2023

credit, where credits due. Peter doing proper journalism.

@piez

100 sats

Feb 25 2023

Peter you crushed this! best hard hitting, honestinterview I’ve ever heard since I got into Bitcoin!

@ruintheory

100 sats

Feb 25 2023

Big Balls on you Pete. Love to hear you push on the issue. Grayscale’s position in these cases is literally the same as politicians with FTX funny money.

@al_al_kool_j

100 sats

Mar 3 2023

atta boy Pete.

@yewteehecksoe

100 sats

Feb 25 2023

GBTC is still the best way to get Bitcoin exposure in certain types of retirement and education savings account. Good on ya for pushing Michael to consider what, if any, moral responsibility he may have regarding the Genesis Bankruptcy.

@nanomoto

Mar 16 2023

mstr

@btclibertarian

100 sats

Mar 15 2023

Great podcast and Peter kept him honest. I hope the SEC suit wins for them. But they were doing shady stuff. Hopefully the industry can innovate around multisig escrows and attest to assets .