Crypto Trader Tantra to Liquidate After 'GBTC Discount' Widens to Record

Tantra Labs, a cryptocurrency-focused trading steadfast that offered an interest-bearing investment product, is being coiled down aft reporting "performance degradation" and failing to rise caller capital.

GGG Partners, an Atlanta-based bankruptcy trustee and debt-restructuring consultant, sent Tantra's creditors a missive Thursday stating that it had been appointed liquidation manager to upwind down the company, and that it would beryllium liable for monetizing immoderate assets. A transcript of the missive was obtained by CoinDesk and confirmed by aggregate people.

Katie Goodman, managing spouse astatine GGG, said she couldn't remark beyond the missive erstwhile reached by CoinDesk connected her mobile phone. CoinDesk besides sought remark from Tantra Labs done aggregate platforms, including messages via LinkedIn to respective apical executives who couldn’t beryllium reached.

The missive contained a connection from Russell LaCour, identified arsenic Tantra's CEO, successful which the enforcement attributed the "severe degradation of the show successful its portfolio" partially to a caller widening successful a intimately watched crypto markets gauge known arsenic the "GBTC discount."

"When Tantra Labs was created, the objective was to instrumentality the astir competitory BTC- and ETH-denominated returns successful crypto," LaCour was quoted successful the missive arsenic saying. "In the play starring to today’s determination by the company's enforcement board, however, the institution noticed terrible degradation of show successful its portfolio. This degradation, combined with different events occurring successful the markets successful which Tantra operates, led to the company's equilibrium expanse being enactment successful a precarious position."

He cited factors including "GBTC discounted to unprecedented lows," "directional portfolio show degradation" and "interest spreads collapsing."

According to LaCour, the enforcement committee "immediately explored a restructuring of the equilibrium sheet, arsenic good arsenic different strategical options."

"The Executive Board simultaneously engaged successful negotiations to rise funds with a presumption to perchance continuing the concern but were yet unsuccessful successful raising the indispensable capital," LaCour said.

"Ultimately, aft important treatment and information successful consultation with extracurricular counsel and different nonrecreational advisors, the enforcement committee determined that, successful presumption of each the circumstances, it is successful the champion involvement of the institution to upwind up operations, liquidate our equilibrium expanse and effectuate an orderly and just and equitable organisation of our assets."

The Grayscale Bitcoin Trust, oregon GBTC, is the world's largest cryptocurrency fund, and it trades arsenic a stock. Due to a assortment of factors the stock terms precocious has been trading astatine a grounds discount to the worth of the underlying bitcoin successful the fund.

The discount reached a grounds of 28% this week. As precocious arsenic aboriginal 2021, the stock terms traded astatine a premium, but it tilted antagonistic successful February of past twelvemonth and has been connected a dependable diminution since. Grayscale has said it wants to person the spot into an exchange-traded fund, but truthful acold the U.S. Securities and Exchange Commission has refused to o.k. a carnal bitcoin-backed ETF.

In the meantime, redemptions aren't allowed, truthful investors who don't privation to merchantability their shares successful the unfastened marketplace person to support paying absorption fees to Grayscale. (Grayscale is simply a portion of Digital Currency Group, which besides owns CoinDesk.)

Tantra Labs, which is focused connected bitcoin, initially attracted deposits by promising $100 successful BTC aft signing up and 12% (later 6%) APY.

Accredited investors tin bargain shares successful the Grayscale Bitcoin Trust straight astatine the nett plus worth (NAV) successful regular backstage placements by depositing bitcoin oregon U.S. dollars. The shares tin beryllium sold successful the secondary marketplace lone aft a six-month lock-in period. The spot is simply a closed-end fund, meaning coins deposited stay locked forever.

For respective reasons the GBTC shares consistently traded astatine a double-digit premium to the NAV until aboriginal February. As such, institutions would fastener successful bitcoin oregon U.S. dollars (USD) successful instrumentality for shares priced astatine NAV and offload shares astatine a premium six months later, pocketing the spread.

Grayscale’s popularity surged astatine the extremity of 2020 erstwhile the premium connected GBTC shares roseate to a record-high 40% connected Dec. 17. Some investors bought GBTC shares and simultaneously sold bitcoin futures, ramping up returns. Futures traded astatine a premium of 15% oregon much backmost then.

However, the premium flipped to a discount successful past February and has steadily widened since then, leaving institutions that acquired shares astatine NAV a twelvemonth agone successful loss.