Someone appears to have gone to odd lengths to impersonate digital asset manager Grayscale Investments, possibly in an effort to drive up the prices of two lesser-known cryptocurrencies.

To be clear: Grayscale said it has no intention of creating a financial instrument around nahmii, an Ethereum scaling project, or theta, a video platform. Nevertheless, there is a pair of registered trusts, one for each obscure coin, in the state of Delaware (the trust for nahmii misspells the coin’s name with one “i”). Each of these trusts bears Grayscale’s name, and the registration gives the same agent’s address that the firm uses for its real crypto investment vehicles.

“Grayscale maintains a list of assets that we may potentially include in our family of products, and any further additions will be announced,” an external spokesperson said by email. “Anyone seeking to confirm an asset Grayscale is considering should refer to this list.” Neither nahmii nor theta is on it. 

When asked point-blank if Grayscale had filed the “nahmi” or theta trusts, the spokesperson, Austin Downey, said: “No.”

CoinDesk mistakenly reported on Tuesday that Grayscale, a subsidiary of CoinDesk parent firm Digital Currency Group, had filed to register the trust for the nahmii token, based on public records from the Delaware Division of Corporations. This would have been a significant development had it been true because these registrations are usually a prelude to creating an investment vehicle for a coin. 

Grayscale’s trusts attract significant capital from mainstream investors who can’t or don’t want to go through the hassle of setting up a crypto wallet. All told, the firm manages $27.7 billion in assets through nine active trusts. So a Grayscale registration would be a bullish signal for a coin.

But Grayscale CEO Michael Sonnenshein promptly tweeted that the nahmii story was “inaccurate,” and CoinDesk corrected the story. 

Still, even though Grayscale said it did not file the registration with the Division of Corporations for nahmii, or a similar one for theta, someone did; the public records can easily be found online in the state agency’s databases. 

The Nahmii team tweeted that it was “not in discussions with Greyscale about filing a trust.”

An email to the address listed on Nahmii’s website received a bounceback message. After the publication of this article, representatives from the Theta project told CoinDesk they were not involved in filing the trust registration.

“We are very upset to see now that someone else may have done this,” Theta Head of Strategy Wes Levitt said. “We are talking to our counsel … to see if there is a way to learn who exactly filed this, and what other legal actions are available to us against this person filing what we now consider a fraud.”

A customer service representative with the Delaware Division of Corporations said the Division would not be able to share any identifying information about who filed the trusts. So for now, the filings’ origins remain a mystery (no phone number or person’s name is in the documents). 

Dead ringers

If the two trusts in question were set up by impostors, it wouldn’t be the first such ruse in crypto, though this one would be subtler than usual. 

Scammers often impersonate influential community figures on Twitter and have pretended to be CoinDesk staff members and spoofed our email newsletters, all in order to trick people into sending them money.

The dubious Grayscale Nahmi Trust (here on out, GNT) and Grayscale Theta Trust (GTT) filings were very similar to those of the genuine Grayscale Bitcoin Trust (GBTC) and Grayscale Litecoin Trust (GLTC). For example, they are all registered at 251 Little Falls Drive in Wilmington, Del. (ZIP code 19808). 

The key difference was in the type of entity set up. While GBTC and GLTC were registered as Statutory Trusts, GNT and GTT were registered as Limited Liability Companies, a detail which “raises questions,” said Sarah Brennan, a corporate and securities attorney at Harter, Secrest and Emery.

Indeed, of the 34 “Grayscale” trusts registered with the Delaware Division of Corporations, only two were registered as LLCs. These are the entities that Grayscale said it did not set up.

Eight of the registered statutory trusts match existing Grayscale products: BTC, BCH, ETH, ETC, ZEN, LTC, XLM and ZCH. A ninth, its XRP Trust, was dissolved earlier this year as a result of a Securities and Exchange Commission suit against Ripple alleging its sales of the cryptocurrency violate federal securities law. 

Another 23 of the registered statutory trusts are on a list of assets that Grayscale is “currently considering,” according to a February post on Medium.

The remaining two: Theta, filed in February, and Nahmi (again, sans the coin’s second “i”), filed in April.

‘Classic crypto’

It’s conceivable these apparently fake entities were set up in hopes the news media would discover and report their existence, with the ultimate goal of pumping the prices of these tokens. 

This sort of move was almost inevitable, said Brennan, who called it “classic crypto marketing.”

She pointed to a January CoinDesk article about possible future trusts (the article precedes Grayscale’s Medium post), saying these trust filings easily lead to speculation around whether certain assets might become part of a new investment vehicle.

If pumping nahmii was the motive, the plan worked: According to CoinGecko, NII’s price more than doubled on Tuesday after the erroneous CoinDesk article was published, hitting a peak of $0.0148. As of press time, it traded at half that price, around $0.0075. It’s still up dramatically over the past month, however. 

Theta has also risen in price over the past few months, though there doesn’t appear to be any correlation between the filing of the fake Grayscale trust and the token’s price.

It is difficult to determine the ownership of an entity formed in Delaware, Brennan said.

While there are a few limits on what entities can be formed – for example, Delaware might not allow a new entity to be created that has a “confusingly similar” name to an existing company or product – pretty much anyone can set up an entity in the state, said Brennan, who also leads the digital asset practice at Harter.

“You can form basically any entity that isn’t taken,” she said. In “Delaware and the other states, their concern is ‘does this entity exist in my state?’ only. If not, ‘yes you can pay me to set this entity up.’”

Companies can try to prevent this by reserving names for a period of time or registering an entity without having it immediately up and running, she said. 

CoinDesk has filed a Freedom of Information Act request for the certificates of formation for these Nahmi and Theta LLCs, and had not received a response as of press time. According to the Delaware state website, the government has 15 days to respond.

UPDATE (April 8, 2021, 13:45 UTC): Updated with comments from the Theta team.