Grayscale may consider a 20% tender offer on GBTC shares if its bid to convert into a Bitcoin spot ETF ultimately fails, said CEO Michael Sonnenshein to investors on Monday.

In an interview on the same day, the executive also commented on the FTX’s collapse, the crypto bear market, and the state of Binance.

Shoring Up GBTC

In a conversation with CNBC, Sonnenshein acknowledged that the industry is going through a “crypto winter,” which will produce more “regulation” and “consolidation” on the other side.

“We’ve seen time and again bad actors get weeded out of the ecosystem, and crypto emerges more resilient and even stronger each time we see these types of events,” he said. 

The crypto winter has been rough on Grayscale’s Bitcoin Trust (GBTC) – a popular investment vehicle for gaining exposure to the price of Bitcoin. 

Not only has the value of its Bitcoin holdings declined substantially, but the discount between the market price of GBTC shares and the company’s net asset value has grown wider than ever to nearly 50%. In other words, while Grayscale holds $15.42 in Bitcoin per share, those shares only trade for $7.91 at writing time. 

Grayscale’s current structure doesn’t allow for shares to be easily redeemed for Bitcoin, which allows for the value discrepancy, to begin with. That’s why the firm seeks to convert its fund into a spot ETF – which would bring share value to par with its underlying Bitcoin, and create massive value for investors. 

As such, the company is currently suing the Securities and Exchange Commission (SEC) for rejecting its conversion attempts at every turn. It has received multiple amicus briefs in its support – including from Coinbase. 

“The SEC recently submitted its reply brief, and we are currently drafting our response to the SEC, which is due January 13, 2023 – with final written briefs due on February 3, 2023,” explained Sonnenshein in a letter to investors. “Shortly thereafter, a three-judge panel will be selected to hear oral arguments and rule on the case.”

Should the courts not rule in Grayscale’s favor, Sonnenshein said that Grayscale would explore “other options” for returning value to investors. One method could be to include a tender offer for up to 20% of outstanding GBTC shares – however, this would require relief from the SEC.

What’s Up With Binance?

CNBC also asked Sonnenshein for his thoughts on Binance and the state of its financials. CEO Changpeng Zhao (CZ) was interviewed by the same panel last week, and was unable to clearly state if Binance could handle a $2 billion clawback resulting from FTX’s bankruptcy proceedings. 

While Binance received a proof of reserves audit earlier this month from Mazars Group, the company paused its services to crypto firms shortly after due to concerns about how their reports were publicly understood. Binance and other firms, like Tether, have often claimed that audits are difficult to come by in the digital asset space. 

Sonnenshein, however, rejected that idea. 

“We’ve had audited financials of our investment products – Bitcoin, Ethereum… those have all been audited going back to 2013, 2014,” he said. “I reject the premise that it’s hard to get audited financials done.”