The US Securities and Exchange Commission (SEC) has issued a cease-and-desist order against the Bitcoin Investment Trust (BIT) and its authorized participant SecondMarket, the latter of which has been ordered to disgorge roughly $50,000 in a settlement with the agency.
Originally established by investor and Digital Currency Group CEO Barry Silbert when he was CEO of SecondMarket, the BIT, now managed by Digital Currency Group subsidiary Genesis Trading, creates and redeems publicly listed shares tied to the value of bitcoin holdings held by the trust. The BIT is traded on the OTCQX market.
Specifically, the cease-and-desist order relates to a share redemption program conducted in 2014. According to disclosures published last year by Grayscale, the program drew the attention of SEC regulators because the repurchases took place as shares were being created by the trust – in violation of Regulation M, the SEC said in its release today.
As part of its redemption program, SecondMarket repurchased 85,721 shares between 2nd April and 4th September 2014, the SEC said, earning $51,650.11.
“The SEC’s Rule 101 of Regulation M prohibits distribution participants and their affiliated purchasers from purchasing any security that is the subject of a distribution until after