50 Shades of Trust: Grayscale & the Nahmii Shuffle

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In what I hope was a fantastic April Fool’s prank, somebody filed to form a business in the State of Delaware called “GRAYSCALE NAHMI TRUST (NII) LLC” on April 1st, 2021.

This might seem like a bureaucratic non-event, but it raised a few eyebrows for a couple reasons. Grayscale has been forming legal entities in Delaware at a lawyer-satisfying rate since the end of 2020. From December of that year until the start of March 2021, a total of 22 (maybe 24, we’ll get to that) entities have been formed in The First State by Grayscale.

Why would anybody care? Grayscale has an investment product called the Grayscale Bitcoin Trust, which you can go buy through your brokerage account right now under the ticker symbol GBTC. If you were to do that, you would be buying shares in a statutory trust which takes all the money put into it and buys bitcoin. It’s a workaround to form a bitcoin exchange traded fund (ETF), which the SEC has shot down multiple applications for over the past couple years.

Grayscale didn’t stop at bitcoin. They rolled out investment products for ETH, BCH, LTC and others since launching GBTC in September 2013. In Q4 of 2018, they launched GRAYSCALE STELLAR LUMENS TRUST (XLM). This was their ninth offering for investments in individual digital assets. Then nothing happened for two years.

Towards the end of 2020 there were rustlings. The COVID winter was a crypto-spring, and the attorneys for Grayscale were busy. A filing was made in Delaware for a File Coin trust. Then December came, and 5 more statutory trusts were filed for BAT, LINK, MANA, LPT and XTZ. Lawyers rejoiced as they collected easy legal fees.

While the lawyers were cashing their checks, the crypto-press was taking notice. Watching out for these filings became a way to see where some of the Wall Street money might be looking to invest in digital assets beyond bitcoin. On the 17th of March, 2021, Grayscale announced they would indeed be launching five more investment options. Traders swooped in, hoping to catch the upswing as what they hoped was big money moving into these names. The value of the coins targeted by these new offerings jumped up with the news, although probably mostly because of traders and FOMO.

Grayscale’s announcement was confirmation that following the filings was a way to get ahead of where they were heading next. What’s more, there’s still 20 legal entities in the state of Delaware that have a Grayscale name attached but no official announcement associated with them from Grayscale. The broader market knows those other 20 entities, so it should be priced in to some degree. What if you could do one better? What if you knew ahead of time what Grayscale would file for next?

Now we have arrived at the beginning, on April 1st, 2021 somebody filed to form a business in the State of Delaware called “GRAYSCALE NAHMI TRUST (NII) LLC” on April 1st, 2021. 

Crypto markets took notice. The sleepy little micro-cap altcoin NII, with a price of $0.0003 on January 1st, went up to $0.012 when it reached its high on April 6th. That’s 3900%. 

What’s Nahmii? What do they do? Who are they? Is it any good? Nobody cared. Volume and priced spiked. Animal spirits reigned. Some people made money. Some people probably still have Nahmii in their wallets wondering what the hell a Nahmii is.

April Fool’s

On April 6th, Coindesk released this article, wherein a Grayscale spokeswoman is cited as saying Grayscale did not form this entity. WHOOPSIE!

Was this just a joke? Perhaps if we’re being generous. Is it still a joke if someone profits off it? There were some hints of volume picking up on March 18th & 19th, but the real action started on March 22nd, when NII’s volume soared. Here’s a quick chart of some average volume over some arguably arbitrary timeframes:

Was volume going up prior to these shenanigans? Yes. Did it skyrocket before the filing and go even higher after. Yes and yes. Somebody knew this was going down, bought up all the cute little Nahmiis they could while it was trading around or below $0.001 and was able to ride that to around $0.01. They should’ve been able to 10x on this. 

Not a bad prank. And the crypto market ate it up. 

The Red Flag Nobody Saw

Can we learn anything from this? You betcha. All of Grayscales filings are for statutory trusts. It’s this structure that allows them to trade publicly and avoid all those pesky SEC approvals for an ETF. The only clue you need is in the name: GRAYSCALE NAHMI TRUST (NII) LLC.

When you file to form a business entity, it’s legal structure is in the name. This is why you’ll see “Inc” or “Incorporated” when companies official names are listed. In the case of the faux-Grayscale imposter, we can see that it’s a limited liability corporation (LLC). All of the legitimate filings that Grayscale launched a product for do not have any of these designations because they are statutory trusts, which can be confirmed on the Delaware Secretary of State’s website:

It’s a little more involved to form one of these, and you’re average prankster probably isn’t going to go through the trouble. Filing an LLC, on the other hand, is very simple and quick.

As I mentioned, there are currently 20 entities with a Grayscale name in Delaware that do not have any official announcement from them. One is the confirmed fake for Nahmi and the other is the GRAYSCALE THETA TRUST (THETA) LLC. See the red flag? With the developments around Nahmi, we might be able to take a better guess at what its formation was attempting to do.

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