Bitcoin Investment Trust and Genesis settle with SEC

Rage Review : The 2014 stock redemption project attracted the attention of the U.S. Securities and Exchange Commission (SEC) because it violated Regulation M (U.S. Internal Revenue Service regulations). Genesis neither admitted nor denied the allegations. Genesis and Bitcoin Investment Trust have reached a settlement with the SEC on the charges. Genesis agreed to pay $51,650.11 in compensation and about $2,100 in interest.

Translation: Nicole

The U.S. Securities and Exchange Commission (SEC) has issued a government injunction against the Bitcoin Investment Trust (BIT) and its authorized participant SecondMarket, negotiating compensation of approximately $50,000.

Originally founded by investor and Digital Currency Group CEO Barry Silbert, then CEO of SecondMarket, the value of BIT shares is closely tied to the value of Bitcoin, with BIT unrestricted shares quoted on the U.S. over-the-counter market.

Specifically, the SEC said in today’s press release, the government’s injunction is related to a stock redemption program in 2014. According to a disclosure document published by Grayscale last year, the stock redemption program attracted the attention of SEC regulators because the buybacks occurred after the Bitcoin Investment Trust created shares — a violation of Regulation M.

The SEC said that as part of the redemption program, SecondMarket purchased an additional 85,721 shares between April 2 and September 4, 2014, earning a profit of $51,650.11.

“Rule 101 of the SEC’s Regulation M prohibits distribution participants and their affiliated purchasers from purchasing any securities used for the purpose of a distribution until the applicable restricted period has expired. Rule 102 also prohibits issuers, selling security owners, and affiliated purchasers from purchasing securities,” the SEC said.

The SEC contacted SecondMarket later that month and halted the redemption program in late October, according to the documents.

The agency cited the government’s injunction, saying that SecondMarket relied on external legal advice before launching the redemption project, which was also launched with the agency’s decision in mind.

According to the government injunction notice, SecondMarket and BIT agreed that in order to avoid further violations of SEC regulations, SecondMarket would pay the proceeds of $51,650.11 plus approximately $2,100 in interest.

When asked for comment, Genesis and the Bitcoin Investment Trust stressed that “no monetary penalty has been assessed” and that the companies have neither “admitted nor denied” any of the allegations.

"Both Genesis and BIT are very pleased and Genesis intends to continue to serve as an authorized participant of BIT," the company said.

The full statement from the company is as follows: “As reported earlier today, without admitting or denying, Genesis Global Trading, Inc (Genesis) and the Bitcoin Investment Trust (BIT) have settled charges with the Securities and Exchange Commission (SEC) alleging that they violated Sections 101 and 102 of Regulation M. Genesis has agreed to pay $51,650.11 in disgorgement of funds earned through the implementation of the shareholder redemption program. No monetary penalty will be assessed, and Genesis received legal advice related to the development and implementation of the redemption program. Genesis and BIT are pleased, and Genesis intends to continue its role as an authorized participant of BIT.”