We secured dismissal of breach of contract and fiduciary duty claims for Grayscale

Davis Polk represented Grayscale Investments, LLC and Grayscale’s CEO, Michael Sonnenshein, in connection with litigation filed in Delaware Chancery Court by Alameda Research Ltd., formerly part of a family of entities managed by Sam Bankman-Fried. Alameda, which filed for bankruptcy in November 2022, sought to recover hundreds of millions of dollars from our clients for the benefit of its chapter 11 bankruptcy estate.

In March 2023, Alameda filed a complaint alleging various breach of contract and fiduciary duty claims, including that the defendants had breached the terms of the trust agreements of Grayscale Bitcoin Trust and Grayscale Ethereum Trust by failing to reduce the sponsor’s fees and operate a redemption program. In May 2023, Davis Polk moved to dismiss all claims arguing, in part, that Alameda’s claims associated with the sponsor’s fees were derivative and therefore barred and that the remaining claims lacked merit given the plain terms of the trust agreements. 

In September 2023, Alameda filed an amended complaint dropping all claims associated with the sponsor’s fees and alleging breach of contract and fiduciary duty claims concerning only Grayscale’s purported failure to operate a redemption program. In December 2023, Davis Polk moved to dismiss all claims, arguing that Grayscale had no obligation, contractual or fiduciary, to operate a redemption program. 

In January 2024, while Grayscale’s motion to dismiss was pending, Alameda voluntarily dismissed the action. 

The Davis Polk team included partners Benjamin S. Kaminetzky and Brett M. McMahon. All members of the Davis Polk team are based in the New York office.

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