--- 1c1 ----------------------- < S-1/A 1 d68862ds1a.htm AMENDMENT NO.6 > S-1/A 1 d296375ds1a.htm AMENDMENT NO.9 TO FORM S-1 --- 4c4,5 ----------------------- < As filed with the Securities and Exchange Commission on June 29, 2016 > As filed with the Securities and Exchange Commission on February > 8, 2017 --- 14c15 ----------------------- < Amendment No. 6 to > Amendment No. 9 to --- 30,31c31 ----------------------- < Delaware 6221 [ ] < > Delaware 6221 81-6728214 --- 33,41c33,34 ----------------------- < < incorporation or organization) < < (Primary Standard Industrial < < Classification Code Number) < < (I.R.S. Employer < > incorporation or organization) (Primary Standard Industrial > Classification Code Number) (I.R.S. Employer --- 44,46c37 ----------------------- < 1007 Orange Street, Nemours Building, < < Suite 1463, Wilmington, DE 19801 > 301 N. Market Street, Suite 1463, Wilmington, DE 19801 --- 66c57 ----------------------- < David H. Brill, Esq. > Cameron H. Winklevoss --- 70c61,63 ----------------------- < 1007 Orange Street, Nemours Building, Suite > 301 N. Market Street > > Suite 1463, --- 72c65 ----------------------- < 1463, Wilmington, DE 19801 > Wilmington, DE 19801 --- 90c83 ----------------------- < the Securities Act of 1933, check the following box. x > the Securities Act of 1933, check the following box. [X] --- 96c89 ----------------------- < the same offering. ¨ > the same offering. [_] --- 101c94 ----------------------- < effective registration statement for the same offering. ¨ > effective registration statement for the same offering. [_] --- 106c99 ----------------------- < effective registration statement for the same offering. ¨ > effective registration statement for the same offering. [_] --- 115c108 ----------------------- < Large accelerated filer ¨ Accelerated filer ¨ > Large accelerated filer [_] Accelerated filer [_] --- 117,118c110,111 ----------------------- < Non-accelerated filer x (Do not check if a smaller reporting company) < Smaller reporting company ¨ > Non-accelerated filer [X] (Do not check if a smaller reporting company) > Smaller reporting company [_] --- 150,152c138 ----------------------- < < Winklevoss Bitcoin Shares < 1,000,000 $[65.00] $[65,000,000.00] $[ ] > Winklevoss Bitcoin Shares 10,000,000 $[10.00] $[100,000,000.00] $ [ ] --- 157,162c143,148 ----------------------- < Baskets") represents [0.10] bitcoin and is offered at a per Share < price equal to the price of [0.10] bitcoin. < The price of bitcoin is based on the Gemini Exchange spot price as of < 4:00 p.m. Eastern time. On [ ], 2016, this price was $[ ], and the < price of each Share was $[ ]. The Seed Baskets consist of [100,000] < Shares worth [10,000] bitcoin. > Baskets") represents [0.01] bitcoin and is offered at a per Share > price equal to the price of [0.01] bitcoin. > The price of bitcoin is based on the 4:00 p.m. Eastern Time Gemini > Exchange Auction Price (as defined herein). On [ ], 2017, this price > was $[ ], and the price of each Share was $[ ]. The Seed Baskets > consist of [1,000,000] Shares worth [10,000] bitcoin. --- 187c173 ----------------------- < Preliminary Prospectus dated June 29, 2016 > Preliminary Prospectus dated [ ], 2017 --- 189c175 ----------------------- < [LOGO] > LOGO --- 198,207c184,193 ----------------------- < Trust's purpose is to hold bitcoin, which is a digital commodity < ("Digital Asset") based on the decentralized, open source protocol < of the peer-to-peer Bitcoin computer network (the "Bitcoin < Network"). Digital Asset Services, LLC, formerly Math-Based < Asset Services, LLC, is the sponsor of the Trust (the "Sponsor"), < Delaware Trust Company is the trustee of the Trust (the "Trustee"), < [ ] is both the administrator (the "Administrator") and trust agency < service provider (the "Trust Agency Service Provider") of the Trust, < and Gemini Trust Company, LLC, an affiliate of the Sponsor, is the < custodian of the Trust (the "Custodian"). > Trust's purpose is to hold bitcoin, which is a digital asset ("Digital > Asset") based on the decentralized, open source protocol of the > peer-to-peer Bitcoin computer network (the "Bitcoin Network"). Digital > Asset Services, LLC, formerly Math-Based Asset Services, LLC, is > the sponsor of the Trust (the "Sponsor"); Delaware Trust Company > is the trustee of the Trust (the "Trustee"); State Street Bank > and Trust Company ("State Street") is both the administrator (the > "Administrator") and transfer agent (the "Transfer Agent) of the > Trust; and Gemini Trust Company, LLC, an affiliate of the Sponsor, > is the custodian of the Trust (the "Custodian"). --- 210c196 ----------------------- < The Trust is expected to issue and > The Trust is initially expected to issue and --- 212c198 ----------------------- < 50,000 Shares (each block of 50,000 Shares is a "Basket"). > 100,000 Shares (each block of 100,000 Shares is a "Basket"). --- 216,217c202,203 ----------------------- < On a creation, Baskets will be distributed to the Authorized < Participants by the Trust in exchange for the delivery to the Trust > On a creation, Baskets will be distributed to the creating Authorized > Participant by the Trust in exchange for the delivery to the Trust --- 219,227c205,214 ----------------------- < to the value of the Shares being purchased). < On a redemption, the Trust will distribute bitcoin equal in value to < the value of the Shares being redeemed to the redeeming Authorized < Participant in exchange for the delivery to the Trust of one or < more Baskets. < On each Business Day, the value of each Basket accepted by the < Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value < of the Basket will be equal to the value of 50,000 Shares at their > to the net asset value per Share of the Trust ("NAV") multiplied by > the number of Shares in the Basket). > On a redemption, the Trust will distribute bitcoin equal in value > to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. > On each Business Day, the value of each Basket accepted by the Transfer > Agent in a creation or redemption transaction will be the same (i.e., > each Basket will initially consist of 100,000 Shares and the value > of the Basket will be equal to the value of 100,000 Shares at their --- 231,232c218,219 ----------------------- < Prior to this offering, there has been no public market for the < Shares. The Shares will be listed and trade on Bats BZX Exchange, > Prior to this offering, there has been no public market for > the Shares. The Shares will be listed on the Bats BZX Exchange, --- 236c223 ----------------------- < See "Risk Factors" starting on page 13. Neither the Securities and > See "Risk Factors" starting on page [14]. Neither the Securities and --- 242a230,231 ----------------------- > Table of Contents > --- 257,261c246,252 ----------------------- < On [ ], [INITIAL PURCHASER] (the "Initial Purchaser"), subject < to certain conditions, purchased [100,000] Shares in exchange for < [10,000] bitcoin worth $[ ], which comprise the initial Baskets (the < "Seed Baskets'), as described in the "Plan of Distribution." Delivery < of the Seed Baskets will be made on or about [ ]. > On [ ], [INITIAL PURCHASER] (the "Initial Purchaser"), subject to > certain conditions, purchased [1,000,000] Shares in exchange for > [10,000] bitcoin worth $[ ], which comprise the initial [ten (10)] > Baskets of the > Trust's Shares (the "Seed Baskets'), as described in the "Plan of > Distribution." Delivery of the Seed Baskets will be made on or about > [ ]. --- 265c256 ----------------------- < Baskets in set amounts of bitcoin in an amount equal to the full > Baskets in set quantities of bitcoin in a quantity equal to the full --- 267,268c258,259 ----------------------- < Each Share in the Seed Baskets represents [0.10] bitcoin, and each < Seed Basket consists of 50,000 Shares worth [5,000] bitcoin. > Each Share in the Seed Baskets represents [0.01] bitcoin, and each > Seed Basket consists of 100,000 Shares worth [1,000] bitcoin. --- 270,273c261,264 ----------------------- < Neither the Initial Purchaser nor the Authorized Participants will < receive a selling commission from the Trust in consideration of their < distribution of the Shares to the public through sale on Bats < . Purchasers of the Shares may be subject to customary brokerage > Neither the Initial Purchaser nor the Authorized Participants > will receive a selling commission from the Trust in consideration > of their distribution of the Shares to the public through sale on > Bats. Purchases of the Shares may be subject to customary brokerage --- 283,284c274,275 ----------------------- < 4:00 p.m. Eastern time Gemini Exchange Spot Price (as defined herein) < of 0.10 bitcoin on the date of formation of the Trust. > 4:00 p.m. Eastern Time Gemini Exchange Auction Price (as defined > herein) of 0.01 bitcoin on the date of formation of the Trust. --- 286c277 ----------------------- < The date of this prospectus is [ ], 2016. > The date of this prospectus is [ ], 2017. --- 301c292 ----------------------- < 7 > 8 --- 304c295 ----------------------- < 13 > 14 --- 307c298 ----------------------- < 39 > 42 --- 310c301 ----------------------- < 39 > 42 --- 313c304 ----------------------- < 65 > 69 --- 316c307 ----------------------- < 70 > 74 --- 319c310 ----------------------- < 73 > 77 --- 322c313 ----------------------- < 76 > 80 --- 325c316 ----------------------- < 77 > 81 --- 327,328c318,319 ----------------------- < The Trust Agency Service Provider < 78 > The Transfer Agent > 82 --- 331c322 ----------------------- < 79 > 83 --- 334c325 ----------------------- < 80 > 84 --- 337c328 ----------------------- < 81 > 85 --- 341c332 ----------------------- < 83 > 87 --- 344c335 ----------------------- < 84 > 89 --- 347c338 ----------------------- < 88 > 94 --- 350c341 ----------------------- < 89 > 96 --- 353c344 ----------------------- < 91 > 98 --- 356c347 ----------------------- < 93 > 100 --- 359,361d349 ----------------------- < 94 < < Description of the Trust Servicing Agreement --- 364,365c352,356 ----------------------- < Description of the Trust Agency Service Provider Agreement < 104 > Description of the Administration Agreement > 108 > > Description of the Transfer Agency and Services Agreement > 110 --- 368c359 ----------------------- < 107 > 112 --- 371c362 ----------------------- < 110 > 116 --- 373,374c364,365 ----------------------- < Erisa and Related Considerations < 114 > ERISA and Related Considerations > 120 --- 377c368 ----------------------- < 115 > 121 --- 380c371 ----------------------- < 117 > 123 --- 383c374 ----------------------- < 117 > 123 --- 386c377 ----------------------- < 117 > 123 --- 389c380 ----------------------- < 118 > 124 --- 394c385 ----------------------- < Statement of Financial Condition > Sample Financial Statements --- 485,489c476,481 ----------------------- < pursuant to the Trust Agreement between the Sponsor (as grantor) and < the Trustee (the "Trust Agreement"), which sets forth the respective < rights and duties of the Sponsor and the Trustee and authorizes the < Sponsor, on behalf of the Trust, to enter into a custody agreement < (the "Trust Custody Agreement") with the Custodian. > pursuant to the Amended and Restated Declaration of Trust and Trust > Agreement between the Sponsor (as grantor) and the Trustee (the > "Trust Agreement"), which sets forth the respective rights and duties > of the Sponsor and the Trustee and authorizes the Sponsor, on behalf > of the Trust, to enter into a custody agreement (the "Trust Custody > Agreement") with the Custodian. --- 500,501c492,493 ----------------------- < The Trust only holds bitcoin, which is a digital commodity1 that is < not issued by any government, bank or central organization > The Trust only holds bitcoin, which is a digital asset1 that is not > issued by any government, bank or central organization --- 528,529c520,521 ----------------------- < On a creation, Baskets will be distributed to the Authorized < Participants by the Trust in exchange for the delivery to the Trust > On a creation, Baskets will be distributed to the creating Authorized > Participant by the Trust in exchange for the delivery to the Trust --- 531,542c523,533 ----------------------- < to the value of the Shares being purchased). < On a redemption, the Trust will distribute bitcoin equal in value to < the value of the Shares being redeemed to the redeeming Authorized < Participant in exchange for the delivery to the Trust of one or < more Baskets. < On each Business Day, the value of each Basket accepted by the < Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value < of the Basket will be equal to the value of 50,000 Shares at their < net asset value per Share on that day). < The Trust will not issue or redeem fractions of a Basket. The < investment objective > to the net asset value per Share of the Trust ("NAV") multiplied by > the number of Shares in the Basket). > On a redemption, the Trust will distribute bitcoin equal in value > to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. > On each Business Day, the value of each Basket accepted by the Transfer > Agent in a creation or redemption transaction will be the same (i.e., > each Basket will initially consist of 100,000 Shares and the value > of the Basket will be equal to the value of 100,000 Shares at their > net asset value per Share on that --- 546,549c537 ----------------------- < See In re Coinflip, Inc., < No. 15-29 (CFTC Sept. 17, 2015), available at: < http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfcoinfliprorder09172015.pdf < ("Coinflip"). > See In re Coinflip, Inc., No. 15-29 (CFTC Sept. 17, 2015) ("Coinflip"). --- 562,564c549,554 ----------------------- < of the Trust is for the Shares to track the price of bitcoin, as < measured by the spot price at 4:00 p.m. Eastern time on the Gemini < exchange ("Gemini Exchange") (the "Gemini Exchange Spot Price") > day). > The Trust will not issue or redeem fractions of a Basket. The > investment objective of the Trust is for the Shares to track the > price of bitcoin, as measured by the clearing price of a two-sided > auction which occurs daily at 4:00 p.m. Eastern Time on the Gemini > Exchange ("Gemini Exchange") (the "Gemini Exchange Auction Price"), --- 570c560,561 ----------------------- < the Sponsor for providing the Gemini Exchange Spot Price. > the Sponsor for providing > the Gemini Exchange Auction Price. --- 577,578c568,569 ----------------------- < fractional undivided beneficial interest in and ownership of the Trust < and are expected to be traded under the ticker symbol "COIN" on Bats. > fractional undivided beneficial interest in and ownership of the > Trust and are expected to be traded under the ticker symbol "COIN." --- 581,584c572,575 ----------------------- < Trust's Sponsor is Digital Asset Services, LLC. < The Sponsor is a Delaware limited liability company formed on May < 9, 2013, and is wholly-owned by Winklevoss Capital Management, LLC < ("WCM"). > Trust's Sponsor is Digital Asset Services, LLC (formerly Math-Based > Asset Services, LLC). > The Sponsor is a Delaware limited liability company formed on May 9, > 2013, and is wholly-owned by Winklevoss Capital Fund, LLC ("WCF"). --- 586c577 ----------------------- < documents of the Sponsor, WCM, the sole member of the Sponsor, is > documents of the Sponsor, WCF, the sole member of the Sponsor, is --- 591,595c582,586 ----------------------- < patent-pending intellectual property regarding the operation of the < Trust. Winklevoss IP LLC ("WIP"), an affiliate of the Sponsor, is the < owner of and is licensing to the Sponsor such intellectual property < for use by the Trust and the Custodian and other service providers < in the operation of the Trust. > patent-pending intellectual property regarding the operation of > the Trust. Winklevoss IP LLC ("WIP"), an affiliate of the Sponsor, > is the owner of and is licensing to the Sponsor and its affiliates > such intellectual property for use by the Trust and the Custodian > and other service providers in the operation of the Trust. --- 603c594 ----------------------- < amounts, reimbursable under the Trust Agreement, > amounts, reimbursable under the Trust Agreement; --- 605,607c596,598 ----------------------- < the Trust Servicing Agreement, < (iii) the Trust Agency Service Provider's monthly fee and expenses < under the Trust Agency Service Provider Agreement, > the Administration Agreement; > (iii) the Transfer Agent's monthly fee and expenses reimbursable > under the Transfer Agency and Services Agreement; --- 609,612c600,603 ----------------------- < Trust Custody Agreement, < (v) Exchange listing fees, < (vi) U.S. Securities and Exchange Commission ("SEC") registration fees, < (vii) printing and mailing costs, > Trust Custody Agreement; > (v) Exchange listing fees; > (vi) U.S. Securities and Exchange Commission ("SEC") registration fees; > (vii) printing and mailing costs; --- 614,617c605,608 ----------------------- < Trust's website, < (ix) audit fees, < (x) up to $[_] per annum in marketing expenses and < (xi) up to $[100,000] per annum in legal expenses. > Trust's website; > (ix) audit fees; > (x) marketing expenses; and > (xi) up to $100,000 per annum in legal expenses. --- 637,641c628,631 ----------------------- < (including fiduciary duties) and liabilities relating thereto < to the Trust or the owners of beneficial interests in the Shares < ("Shareholders"), such duties and liabilities will be replaced by < the duties and liabilities of the Trustee expressly set forth in the < Trust Agreement. > (including fiduciary duties) and liabilities relating thereto to the > Trust or the Sponsor, such duties and liabilities will be replaced > by the duties and liabilities of the Trustee expressly set forth in > the Trust Agreement. --- 644c634 ----------------------- < Trust Agency Service Provider, Custodian or any other person. > Transfer Agent, Custodian or any other person. --- 646,653c636,639 ----------------------- < [ ], the Administrator of the Trust, is generally responsible for < the day-to-day administration of the Trust under the Trust Servicing < Agreement and in accordance with the provisions of the Trust Agreement. < This includes < (i) assisting the Sponsor in receiving and processing orders from < Authorized Participants to create and redeem Baskets and coordinating < the processing of such orders with the Trust Agency Service Provider < (which in > State Street Bank and Trust Company ("State Street"), the > Administrator of the Trust, is generally responsible for the day-to-day > administration of the Trust under the Administration Agreement and > in accordance --- 659,680c645,669 ----------------------- < this case is, or is an affiliate of, the Administrator) and The < Depository Trust Company ("DTC"), < (ii) calculating the net asset value per Share ("NAV"), < (iii) instructing the Custodian to transfer the < Trust's bitcoin as needed to pay the remuneration due to the Sponsor < ("Sponsor's Fee") in bitcoin (such Bitcoin transfers are expected to < occur approximately monthly in the ordinary course), < (iv) instructing the Custodian to transfer the < Trust's bitcoin as needed to pay any extraordinary Trust expenses < that are not assumed by the Sponsor and < (v) selling or directing the sale of the < Trust's remaining bitcoin in the event of termination of the Trust < and distributing the cash proceeds to the Shareholders of record. < < The < Trust's Trust Agency Service Provider is (or is an affiliate of) < the Administrator and is authorized by the Sponsor under the Trust < Agreement to serve as the transfer agent in accordance with the < provisions of the Trust Agency Service Provider Agreement. < The Trust Agency Service Provider, among other things, provides < transfer agent services with respect to the creation and redemption < of Baskets by Authorized Participants. > with the provisions of the Trust Agreement. > This includes > (i) maintaining the > Trust's books of account; > (ii) calculating the > Trust's NAV in accordance with the procedures outlined in the > Trust's registration statement; > (iii) transmitting the NAV per Share to the Transfer Agent, the > Sponsor, Bats, and other entities as directed by the Sponsor; and > (iv) preparing financial information required for the > Trust's periodic reports and assisting with the audit of the > Trust's financial statements by the > Trust's independent auditor. > > State Street is also the > Trust's Transfer Agent and is authorized by the Sponsor under the > Trust Agreement to serve as the transfer agent in accordance with > the provisions of the Transfer Agency and Services Agreement. The > Transfer Agent, among other things, provides transfer agent services > with respect to the creation and redemption of Baskets by Authorized > Participants. As of the date of this registration statement, Convergex > Execution Solutions LLC, KCG Americas LLC, and Virtu Financial BD LLC > have each signed an Authorized Participant Agreement with the Trust > and, upon the effectiveness of such agreement and the registration > statement, may create and redeem Baskets as described below. --- 701,702c690,691 ----------------------- < The Custodian is responsible for the safekeeping of the < Trust's private keys used to access and transfer the > The Custodian is responsible for the safekeeping of the private keys > used to access and transfer the --- 706,708c695,697 ----------------------- < Trust Servicing Agreement. < Pursuant to the terms of the Trust Agreement and the Trust Custody < Agreement, the Custodian will store all of the > Administration Agreement. > Pursuant to the terms of the Trust Custody Agreement, the Custodian > will store all of the --- 715,718c704,732 ----------------------- < Trust's bitcoin is valued each Business Day using the Gemini < Exchange Spot Price. The Gemini Exchange is owned and operated by < the Custodian and affiliated with the Sponsor. As a facility of a New < York State-chartered limited liability trust company, Gemini Exchange > Trust's bitcoin is valued each Business Day using > the Gemini Exchange Auction Price. At 4:00 pm. Eastern Time every day, > the Gemini Exchange conducts a two-sided auction which is open to all > exchange customers, including Authorized Participants and affiliates > of the Sponsor. Similar to the closing auction on Bats and other > U.S. equities exchanges, the auction process incorporates both > auction-only and continuous trading book orders to find a single > price at which the most interest is eligible to trade (sometimes > called "Walrasian equilibrium"). Because indicative auction pricing > is published publicly throughout the ten (10) minutes prior to the > auction, this mechanism allows participants to engage in thorough > price discovery while concentrating liquidity and trading volume at > a single moment each day. > Additionally, the daily two-sided auction on the Gemini Exchange > was specifically designed to maximize price discovery and liquidity, > which should > (i) insulate > the Gemini Exchange Auction Price from price swings and volatility, > (ii) minimize the effects of momentum pricing, > (iii) improve the effectiveness of > the arbitrage mechanism for Authorized Participants, and > (iv) fairly reflect the value of the > Trust's bitcoin > . Authorized Participants are permitted to, but not obligated to, > participate in the 4:00 p.m. auction on the Gemini Exchange. > > The Gemini Exchange is owned and operated by the Custodian and > is affiliated with the Sponsor. As a facility of a New York > State-chartered limited liability trust company, Gemini Exchange --- 721,722c735,736 ----------------------- < from the Trust or the Sponsor for providing the Gemini Exchange Spot < Price to the Administrator. > from the Trust or the Sponsor for providing > the Gemini Exchange Auction Price to the Administrator. --- 725,727c739,747 ----------------------- < Sponsor, Administrator, Trust Agency Service Provider and Custodian < are further described in "Sponsor," "Trustee," "Administrator," < "Trust Agency Service Provider" and "Custodian," respectively. > Sponsor, Administrator, Transfer Agent and Custodian are further > described in "Sponsor," "Trustee," "Administrator," "Transfer Agent" > and "Custodian," > > 3 > > Table of Contents > > respectively. --- 729,730c749,750 ----------------------- < Trustee, Sponsor, Administrator, Trust Agency Service Provider and < Custodian are set forth in " > Trustee, Sponsor, Administrator, Transfer Agent and Custodian are > set forth in " --- 734c754 ----------------------- < Description of the Trust Servicing Agreement," " > Description of the Administration Agreement," " --- 736c756 ----------------------- < Description of the Trust Agency Service Provider Agreement," and " > Description of the Transfer Agency and Services Agreement," and " --- 739,740c759,760 ----------------------- < The Trust Agreement, Trust Servicing Agreement, Trust Agency Service < Provider Agreement and Trust Custody Agreement are collectively > The Trust Agreement, Administration Agreement, Transfer Agency and > Services Agreement and Trust Custody Agreement are collectively --- 746,747c766,767 ----------------------- < price of bitcoin, as measured at 4:00 p.m. Eastern time using the < Gemini Exchange Spot Price on each Business Day. > price of bitcoin using > the Gemini Exchange Auction Price on each Business Day. --- 752,755d771 ----------------------- < 3 < < Table of Contents < --- 780,782c796,798 ----------------------- < September 17, 2015, when the CFTC instituted and settled administrative < proceedings that involved a bitcoin derivatives trading platform and < its chief executive officer (the "Coinflip case"). > September 17, 2015, when, in the Coinflip case, the CFTC instituted and > settled administrative proceedings that involved a bitcoin derivatives > trading platform and its chief executive officer. --- 797,802c813,842 ----------------------- < that bitcoin is not encompassed by the definition of currency under < the CEA and CFTC regulations. < The CFTC defined bitcoin and other "virtual currencies" (also known as < Digital Assets) as "a digital representation of value that functions < as a medium of exchange, a unit of account, and/or a store of value, < but does not have legal tender status in any jurisdiction > that bitcoin is not encompassed by the definition of currency under the > > 3 See, e.g., SEC v. Homero Joshua Garza, GAW Miners, LLC and > ZenMiner, LLC, Complaint and Demand for Jury Trial, Case 3:15-cv-01760 > (D. Conn. Dec. 1, 2015) (The Commission brought charges in connection > with a bitcoin-related Ponzi scheme); In re Erik T. Voorhees, > Securities Act Release No. 9592 (June 3, 2014) (The Commission > brought an administrative action in connection with the offering of > unregistered securities of two bitcoin-related entities); In re > BTC Trading, Corp. and Ethan Burnside, Securities Act Release > No. 9685 (Dec. 8, 2014) (The Commission brought an administrative > action in connection with the operation and offering of securities > of two online exchanges, neither of which were registered with the > Commission, that accepted payment in bitcoin and primarily listed > virtual currency-related companies.); In re > Sand Hill Exchange, et al., Securities Act Release No. 9809 (June 17, > 2015) (The Commission took legal action against an online exchange > that accepted payment in bitcoin in connection with disseminating > fraudulent information, among other matters). > > 4 > > Table of Contents > > CEA and CFTC regulations. > In Coinflip, the CFTC defined bitcoin and other "virtual currencies" > (also known as Digital Assets) as "a digital representation of > value that functions as a medium of exchange, a unit of account, > and/or a store of value, but does not have legal tender status in > any jurisdiction --- 807a848,855 ----------------------- > The CFTC affirmed its approach to the regulation of bitcoin and > bitcoin-related enterprises on June 2, 2016, when the CFTC settled > charges against Bitfinex, a Bitcoin Exchange based in Hong Kong. > In its Order, the CFTC found that Bitfinex engaged in "illegal, > off-exchange commodity transactions and failed to register as a futures > commission merchant" when it facilitated borrowing transactions among > its users to permit the trading of bitcoin on a "leveraged, margined > or financed basis" without first registering with the CFTC.4 --- 813c861 ----------------------- < Eastern District of Texas and the German Ministry of Finance have > Eastern District of Texas5 and the German Ministry of Finance have --- 815,846c863,870 ----------------------- < respectively, and the IRS has classified bitcoin as property that is < not currency for U.S. federal income tax purposes, although the degree < to which such interpretations will become the norm is unknown. The < < 3 < < See, e.g., Complaint and Demand for Jury Trial, SEC v. Homero < Joshua Garza, GAW Miners, LLC and ZenMiner, LLC, Case 3:15-cv-01760 < (D. Conn. Dec. 1, 2015) (The Commission brought charges in connection < with a bitcoin-related Ponzi scheme); SEC v. Erik T. Voorhees, SEC < Administrative Proceeding File No. 3-15902 (June 3, 2014), available at < https://www.sec.gov/litigation/admin/2014/33-9592.pdf (The Commission < brought an administrative action in connection with the offering of < unregistered securities of two bitcoin-related entities); < BTC Trading, Corp. and Ethan Burnside, Securities < Act Release No. 9685 (Dec. 8, 2014), available at < http://www.sec.gov/litigation/admin/2014/33-9685.pdf (The Commission < brought an administrative action in connection with the operation and < offering of securities of two online exchanges, neither of which were < registered with the Commission, that accepted payment in bitcoin and < primarily listed virtual currency-related companies.); SEC v. < Sand Hill Exchange, et al., Securities Act < Release No. 9809 (June 17, 2015), available at < https://www.sec.gov/litigation/admin/2015/33-9809.pdf (The Commission < took legal action against an online exchange that accepted payment < in bitcoin in connection with disseminating fraudulent information, < among other matters). < < 4 < < Table of Contents < > respectively; > a Florida circuit court judge determined that bitcoin did not qualify > as money or "tangible wealth";6 and an opinion from the U.S. District > Court for the Northern District of Illinois identified Bitcoin as a > "unit of account."7 > Additionally, the IRS has classified bitcoin as property that is > not currency for U.S. federal income tax purposes.8 The degree to > which such interpretations will become the norm is unknown. The --- 849c873 ----------------------- < "intangible property," and a number of other states have issued their > "intangible property,"9 and a number of other states have issued their --- 875a900,919 ----------------------- > 4 > See In re BFXNA Inc., Case No. 16-19 (CFTC June 2, 2016). > 5 SEC v. Shavers, Memorandum Opinion Regarding the Court's Subject > Matter Jurisdiction, Case No. 4:13-CV-00416 (E.D. Texas, Aug. 6, 2013) > 6 The > State of Florida v. Espinoza, Order Granting Defendant's Motion to > Dismiss the Information, Case No. F14-2923 (Fla. 11th Cir. Ct. July > 22, 2016) (quoting § 896.101(2)(e), Fla. Stat. (2016)). > 7 Greene v. Mt. Gox Inc., et al., Memorandum Opinion and Order, > Case No. 1:14-cv-01437 (N.D.IL Aug. 26, 2016). > 8 Internal Revenue Service, IRS Virtual Currency Guidelines, Notice > 2014-14 (Apr. 14, 2014). > 9 New York State Department of Taxation and Finance, Tax Department > Policy on Transactions Using Convertible Virtual Currency (Dec. 5, > 2014). > > 5 > > Table of Contents > --- 884c928 ----------------------- < in those countries. In May 2014, the Central Bank of Bolivia banned > in those countries.10 In May 2014, the Central Bank of Bolivia banned --- 886,890c930,934 ----------------------- < government of Ecuador took steps to limit the use of bitcoin in < advance of the issuance of a proposed state-backed Digital Asset. In < April 2015, the Japanese Cabinet approved proposed legal changes that < would reportedly treat bitcoin and other Digital Assets as included < in the definition of currency. > government of Ecuador took steps to limit the use of bitcoin in advance > of the issuance of a proposed state-backed Digital Asset.11 In April > 2015, the Japanese Cabinet approved proposed legal changes that would > reportedly treat bitcoin and other Digital Assets as included in the > definition of currency. --- 895,896c939,946 ----------------------- < These changes were approved by the Japanese Diet in May 2016 and are < expected to be effective beginning in 2017. The regulatory uncertainty > These changes were approved by the Japanese Diet in May 2016 and > are expected to be effective beginning in 2017. In July 2016, the > European Commission released a draft directive that proposed applying > counter-terrorism and anti-money laundering regulations to virtual > currencies, and, in September 2016, the > European Banking authority advised the European Commission to institute > new regulation specific to virtual currencies, with amendments to > existing regulation as a stopgap measure.12 The regulatory uncertainty --- 920c970 ----------------------- < proprietary Cold Storage System, > proprietary Cold Storage System; --- 922,924c972,974 ----------------------- < charter, < (iii) third-party inspection of the Custodian's security and internal < controls, > charter; > (iii) third-party inspection of the Custodian's protocols and internal > controls; --- 927c977,978 ----------------------- < Trust's bitcoin, and > Trust's bitcoin through monthly, independent auditor examinations > and attestations; and --- 936c987,1007 ----------------------- < 5 > 10 > See e.g., HM Revenue & Customs, Bitcoin and Other Cryptocurrencies, > Revenue and Customs Brief 9-2014 (Mar. 3, 2014); Federal Council of > Switzerland, Federal Council Report on Virtual Currencies in Response > to the Schwaab (13.3687) and Weibel (13.4070) Postulates (June 25, > 2014); Central Bank of Iceland, Significant Risk Attached to Use of > Virtual Currency, Release No. 9/2014 (Mar. 19, 2014); > State Bank of Vietnam, Press Release on Bitcoins and Other Virtual > Currencies (Feb. 28, 2014). > 11 Central Bank of Bolivia, Resolution 044/2014 (June 5, 2014); > National Assembly of Ecuador, Monetary and Financial Code (July 24, > 2014). > 12 European Commission, Proposal for Amending Directive 2015/849/EU > on the Prevention of the Use of the Financial System for the Purposes > of Money Laundering or Terrorist Financing and Amending Directive > 2009/101/EC, Directive 2016/0208 (July 5, 2016); European Banking > Authority, Opinion on the EU Commission's Proposal to Bring Virtual > Currencies into the Scope of Directive 2015/849/EU, EBA Opin. 2016-07 > (Aug. 11, 2016). > > 6 --- 952,955c1023,1026 ----------------------- < Accounting Oversight Board, or the PCAOB, requiring mandatory audit < firm rotation or a supplement to the auditor's report in which the < auditor would be required to provide additional information about < the audit and the financial statements of the issuer; > Accounting Oversight Board, or the PCAOB, requiring mandatory auditor > rotation or a supplement to the auditor's report in which the auditor > would be required to provide additional information about the audit > and the financial statements of the issuer; --- 968c1039 ----------------------- < (i) when it has $1.0 billion or more in annual revenues, > (i) when it has $1.0 billion or more in annual revenues; --- 971c1042 ----------------------- < as amended, > as amended; --- 973c1044 ----------------------- < over a three-year period, or > over a three-year period; or --- 994,1000c1065,1072 ----------------------- < The Trustee's principal office is located at 2711 Centerville Road, < Wilmington, DE 19808. < The Sponsor's and Custodian's address is 1007 Orange Street, Nemours < Building, Suite 1463, Wilmington, DE 19801, and the Sponsor's and < Custodian's telephone number is +1 (646) 751-4444. < The Administrator's and the Trust Agency Service Provider's principal < office is located at [ ],[ ],[ ] > The Trustee's principal office is located at Little Falls Centre One, > 2711 Centerville Road, Wilmington, DE 19808. > The Sponsor's address is 301 N. Market Street, Suite 1463, Wilmington, > DE 19801, and its telephone number is +1 (646) 751-4444. > The Administrator's and the Transfer Agent's principal office is > located at One Lincoln Street, Boston, Massachusetts 02111. > The Custodian's address is 600 Third Avenue, 2nd Floor, New York, > NY 10016. --- 1002c1074 ----------------------- < 6 > 7 --- 1008,1009c1080,1082 ----------------------- < Offering The Shares represent units of fractional undivided beneficial < interest in and ownership of the Trust. > Offering > The Shares represent units of fractional undivided beneficial interest > in and ownership of the Trust. --- 1011,1018c1084,1091 ----------------------- < Use of Proceeds Proceeds received by the Trust from the issuance and < sale of Baskets, including the initial [ ] Baskets (the "Seed Baskets") < issued to [INITIAL PURCHASER] in its capacity as the purchaser of < the Seed Baskets (the "Initial Purchaser") in connection with the < formation of the Trust, will consist only of bitcoin. < Pursuant to the Trust Agreement, during the life of the Trust, such < proceeds will only be < (i) held by the Trust, > Use of Proceeds > Proceeds received by the Trust from the issuance and sale of Baskets, > including the initial [ten (10)] Baskets (the "Seed Baskets") issued > to [INITIAL PURCHASER] in its capacity as the purchaser of the Seed > Baskets (the "Initial Purchaser") in connection with the formation of > the Trust, will consist only of bitcoin. During the life of the Trust, > such proceeds will only be > (i) held by the Trust; --- 1027c1100,1101 ----------------------- < Listing Exchange Bats BZX Exchange, Inc. ("Bats"). > Listing Exchange > Bats BZX Exchange, Inc. ("Bats"). --- 1029c1103,1104 ----------------------- < Exchange Symbol COIN > Exchange Symbol > COIN --- 1031c1106,1107 ----------------------- < CUSIP [CUSIP] > CUSIP > 97425P 107 --- 1048,1049c1123,1124 ----------------------- < file stored in a decentralized manner on the computers of each Bitcoin < Network user. > record stored in a decentralized manner on the computers of each > Bitcoin Network user. --- 1065,1068c1140,1143 ----------------------- < of a digital file, downloaded and stored, in whole or in part, on < all Bitcoin Network users' software programs. The file includes all < blocks that have been solved by miners and is updated to include new < blocks as they are solved. > of a digital record, downloaded and stored, in whole or in part, > on all Bitcoin Network users' software programs. The file includes > all blocks that have been solved by miners and is updated to include > new blocks as they are solved. --- 1073,1074c1148 ----------------------- < outstanding transactions are settled and validated through such < recording. The > outstanding transactions are settled and --- 1076c1150 ----------------------- < 7 > 8 --- 1079a1154 ----------------------- > validated through such recording. The --- 1085c1160,1163 ----------------------- < Creation and Redemption of Shares > Creation and Redemption of > > Shares > --- 1091,1092c1169,1170 ----------------------- < On a creation, Baskets will be distributed to the Authorized < Participants by the Trust in exchange for the delivery to the Trust > On a creation, Baskets will be distributed to the creating Authorized > Participant by the Trust in exchange for the delivery to the Trust --- 1094,1098c1172,1176 ----------------------- < to the value of the Shares being purchased). < On a redemption, the Trust will distribute bitcoin equal in value to < the value of the Shares being redeemed to the redeeming Authorized < Participant in exchange for the delivery to the Trust of one or < more Baskets. > to the NAV multiplied by the number of Shares in the Basket). > On a redemption, the Trust will distribute bitcoin equal in value > to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. --- 1100,1103c1178,1186 ----------------------- < Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value < of the Basket will be equal to the value of 50,000 Shares at their < net asset value per Share on that day). > Administrator in a creation or redemption transaction will be the same > (i.e., each Basket will initially consist of 100,000 Shares and the > value of the Basket will be equal to the value of 100,000 Shares at > their net asset value per Share on that day). The quantity of bitcoin > required to create a Basket, or to be delivered upon the redemption of > a Basket, will gradually decrease over time, due to the accrual of the > Trust's expenses, the transfer of the > Trust's bitcoin to pay the Sponsor's Fee, and the transfer of the > Trust's bitcoin to pay any Trust expenses not assumed by the Sponsor. --- 1106,1107c1189,1190 ----------------------- < required to pay a transaction fee ("Transaction Fee") to the Trust < Agency Service Provider for each order to create or redeem Baskets > required to pay a transaction fee ("Transaction Fee") to the Transfer > Agent for each order to create or redeem Baskets --- 1115,1128c1198,1216 ----------------------- < NAV The net asset value per Share ("NAV") of the Trust is the asset < value of the Trust less its liabilities (which include accrued but < unpaid fees and expenses) divided by the number of outstanding Shares < as of 4:00 p.m. Eastern time each day Bats is open for regular trading < (each a "Business Day"). < The Administrator will calculate the NAV using the spot price of the < Gemini Exchange (the "Gemini Exchange Spot Price"). < In the event that the Sponsor determines that the Gemini Exchange < Spot Price is not an appropriate basis for evaluation of the < Trust's bitcoin, < the Sponsor will instruct the Administrator to use the spot price of < the itBit bitcoin exchange (the "itBit Exchange") as an alternative < basis for calculating the < Trust's NAV. > NAV > > The NAV is the asset value of the Trust less its liabilities (which > include accrued but unpaid fees and expenses) divided by the number > of outstanding Shares as of 4:00 p.m. Eastern Time each day Bats is > open for regular trading (each a "Business Day"). > The Administrator will calculate the NAV using the daily two-sided > 4:00 p.m. Eastern Time auction price of the Gemini Exchange (the > "Gemini Exchange Auction Price"), which is publicly available and > will be provided to the Administrator by the Sponsor each Business Day. > In the event that the Sponsor determines that > the Gemini Exchange Auction Price is not an appropriate basis for > evaluation of the > Trust's bitcoin on a given Business Day, > the Sponsor will instruct the Administrator to use the 4:00 > p.m. Eastern Time spot price on the Gemini Exchange or the itBit > bitcoin exchange (the "itBit Exchange") as an alternative basis for > calculating the > Trust's NAV on that Business Day. --- 1132,1149c1220,1224 ----------------------- < regulatory oversight of the NYSDFS. Any determination that the Gemini < Exchange Spot Price is unavailable or otherwise not an appropriate < basis for calculating the < Trust's NAV would be based upon extraordinary criteria in which the < operation of Gemini Exchange is disrupted or otherwise experiencing < material calculation or reporting irregularities. If the Sponsor < determines in good faith that neither the Gemini Exchange Spot Price < nor the spot price on the itBit Exchange is reliable for calculating < the < Trust's NAV on a particular Business Day, including but not limited < to situations where it does not reflect material events occurring < between the time of calculation of such Gemini Exchange Spot Price < or the spot price on the itBit Exchange and the time the < Trust's Shares are valued, bitcoin will be valued using fair < market value pricing as determined in good faith by the Sponsor and < calculated by the Administrator under procedures established in the < Trust Servicing Agreement. < Determining > regulatory oversight of the NYSDFS. Any determination that > the Gemini Exchange Auction Price is unavailable or otherwise not an > appropriate basis for calculating the > Trust's NAV on a given Business Day would be based upon extraordinary > criteria in which the operation of the Gemini Exchange is --- 1151c1226 ----------------------- < 8 > 9 --- 1155,1157c1230,1246 ----------------------- < the fair market value of bitcoin involves the consideration of a number < of subjective factors and thus the prices for bitcoin may differ from < the Gemini Exchange Spot Price or the spot price on the itBit Exchange. > disrupted or otherwise experiencing material calculation or reporting > irregularities. If the Sponsor determines in good faith that none of > the Gemini Exchange Auction Price, the spot price on the Gemini > Exchange, or the spot price on the itBit > Exchange are reliable for calculating the > Trust's NAV on a particular Business Day, including but not limited to > situations where it does not reflect material information or events > occurring between the time of calculation of such prices and the > time the > Trust's Shares are valued, bitcoin will be valued by the Sponsor > using fair market value pricing as determined in good faith by the > Sponsor and calculated by the Administrator. > Determining the fair market value of bitcoin involves the consideration > of a number of subjective factors and thus the prices for bitcoin > may differ from > the Gemini Exchange Auction Price or the spot price on the Gemini > Exchange or itBit Exchange. --- 1160,1163c1249,1254 ----------------------- < publicly. Neither the Administrator nor the Sponsor shall be liable < to any person for the determination that the Gemini Exchange Spot < Price or an alternative basis for a fair market value of bitcoin is < not appropriate as a basis for calculation of the > publicly. > The Sponsor shall not be liable to any person for the determination > that > the Gemini Exchange Auction Price or an alternative basis for a fair > market value of bitcoin is not appropriate as a basis for calculation > of the --- 1167,1168c1258,1260 ----------------------- < Trust's website as soon as practicable after their calculation by < the Administrator. > Trust's website as soon as practicable after its calculation by the > Administrator. > See "Valuation of Bitcoin and Definition of NAV." --- 1180c1271,1272 ----------------------- < the applicable SEC registration fees. > the applicable SEC registration fees, as well as certain other Trust > expenses as detailed herein. --- 1186,1190c1278,1285 ----------------------- < of any calendar month, the Administrator will calculate, using the < Gemini Exchange Spot Price on such calculation day, the number of < bitcoin required to pay the outstanding Sponsor's Fee and transfer < such bitcoin from the Trust Custody Account to an account maintained < by the Custodian for the Sponsor ("Sponsor Custody Account"). > of any calendar month, the Administrator will calculate, using > the Gemini Exchange Auction Price on such calculation day (which will > be provided to it by the Sponsor in the same manner as it is provided > in connection with the daily calculation of the > Trust's NAV), the number of bitcoin required to pay the outstanding > Sponsor's Fee and instruct the Custodian to transfer such bitcoin from > the Trust Custody Account to an account maintained by the Custodian > for the Sponsor ("Sponsor Custody Account"). --- 1196,1198d1290 ----------------------- < The Administrator will from time to time instruct the Custodian to < deliver to the Sponsor Custody Account bitcoin in such quantity as < may be necessary to permit payment of the Sponsor's Fee. --- 1206,1215c1298,1301 ----------------------- < In such circumstances, < the Administrator may from time to time, cause the Custodian to < transfer from the Trust Custody Account and deliver to a segregated < account of the Trust ("Trust Expense Account") bitcoin for sale or < other conversion to U.S. Dollars or other fiat currencies in such < quantity as may be necessary to permit payment of Trust expenses not < assumed by the Sponsor. < Under such circumstances, the sale or conversion to fiat currency < of bitcoin will occur after such bitcoin has been delivered from the < Trust to the Trust Expense Account. > The Sponsor is also authorized to pay or cause to be paid out of > Trust assets other expenses and charges as > the Sponsor may, in its sole discretion, deem necessary or proper > to incur. --- 1219,1223c1305 ----------------------- < in the Trust Custody Account or the Trust Expense Account, the Trust < may determine that the payment of a transaction fee to Bitcoin Network < miners is prudent. < See "Overview of the Bitcoin Industry and Market-Bitcoin Mining & < Creation > in the Trust --- 1225c1307 ----------------------- < 9 > 10 --- 1229c1311,1315 ----------------------- < of New Bitcoin." > Custody Account or the Trust Expense Account, the Trust may determine > that the payment of a transaction fee to Bitcoin Network miners > is prudent. > See "Overview of the Bitcoin Industry and Market-Bitcoin Mining & > Creation of New Bitcoin." --- 1235,1240d1320 ----------------------- < It is anticipated that the reimbursement of transaction fees paid to < miners shall be more than accounted for by the payment of creation < and redemption Transaction Fees by Authorized Participants. < The Trust Agency Service Provider will reimburse the Custodian's < payment of miner fees from and up to the amount of such creation and < redemption Transaction Fees on a monthly basis. --- 1244,1247c1324,1327 ----------------------- < Trust's expenses and the relevant Gemini Exchange Spot Price (for the < payment of the Sponsor's Fee) or the proceeds of the sales of bitcoin < to pay other expenses (for the payment of Trust expenses other than < the Sponsor's Fee, e.g., extraordinary expenses). > Trust's expenses and the relevant Gemini Exchange Auction Price > (for the payment of the Sponsor's Fee) or the proceeds of the sales > of bitcoin to pay other expenses (for the payment of Trust expenses > other than the Sponsor's Fee, e.g., extraordinary expenses). --- 1249,1251c1329,1331 ----------------------- < Each delivery, transfer or sale of bitcoin by the Trust to pay < the Sponsor's Fee or other expenses will be a taxable event for < Shareholders. > Each delivery, transfer or sale of bitcoin by the Trust to pay the > Sponsor's Fee or other expenses will be a taxable event for the owners > of beneficial interests in the Shares ("Shareholders"). --- 1256,1257c1336,1340 ----------------------- < The Trust will dissolve and liquidate if one of the following events < occurs: > > The Trust may be dissolved at the written direction of the Sponsor. > At its discretion, > the Sponsor may elect to terminate the Trust in certain circumstances, > which include, without limitation: --- 1261c1344 ----------------------- < within five business days of their delisting; > within five (5) business days of their delisting; --- 1263,1264c1346,1347 ----------------------- < o Shareholders acting in respect of at least seventy-five (75) percent < of the outstanding Shares notify the Administrator that they elect > o Shareholders acting in respect of at least seventy-five (75) > percent of the outstanding Shares notify the Sponsor that they elect --- 1267,1269c1350,1352 ----------------------- < o [ ] days have elapsed since the Trustee notified the Sponsor of < the Trustee's election to resign and a successor trustee has not been < appointed and accepted its appointment; > o thirty (30) days have elapsed since the Trustee notified the Sponsor > of the Trustee's election to resign and a successor trustee has not > been appointed and accepted its appointment; --- 1273,1274c1356,1357 ----------------------- < Act"), and the Administrator receives notice from the Sponsor that, < because of such determination, termination of the Trust is advisable; > Act"), and the Sponsor determines that, because of such determination, > termination of the Trust is advisable; --- 1277,1278c1360,1361 ----------------------- < CEA, and the Administrator receives notice from the Sponsor that, < because of such determination, termination of the Trust is advisable; > CEA, and the Sponsor determines that, because of such determination, > termination of the Trust is advisable; --- 1290,1292d1372 ----------------------- < 10 < < Table of Contents --- 1295,1297c1375,1376 ----------------------- < Administrator receives notice from the Sponsor that the Sponsor < determines that, because of that tax treatment or change in tax < treatment, termination of the Trust is advisable; > Sponsor determines that, because of such tax treatment or change in > tax treatment, termination of the Trust is advisable; --- 1298a1378,1380 ----------------------- > 11 > > Table of Contents --- 1303c1385 ----------------------- < closing price of the Shares, was less than $[ ] million (as adjusted > closing price of the Shares, was less than $10 million (as adjusted --- 1306c1388 ----------------------- < Trust's formation and the Administrator receives, within six > Trust's formation and the Sponsor determines, within six (6) --- 1308,1309c1390,1391 ----------------------- < capitalization of the Trust was less than $[ ] million, notice from < the Sponsor of its decision to terminate the Trust; > capitalization of the Trust was less than $10 million, to terminate > the Trust; --- 1311c1393 ----------------------- < o Sixty (60) days have elapsed since DTC ceases to act as depository > o sixty (60) days have elapsed since DTC ceases to act as depository --- 1315c1397 ----------------------- < o the Administrator elects to terminate the Trust after the Sponsor > o the Trustee elects to terminate the Trust after the Sponsor --- 1330c1412,1414 ----------------------- < Upon the termination of the Trust, the Administrator will cause the > The Sponsor may make any such determination in its sole discretion. > Upon the termination of the Trust, > the Sponsor will cause the --- 1344,1347c1428,1432 ----------------------- < transactions, < (ii) be a direct participant in DTC, and < (iii) have entered into an agreement with the Sponsor (an "Authorized < Participant Agreement"). > transactions; > (ii) be a direct participant in DTC; and > (iii) have entered into an agreement with the Sponsor, subject > to acceptance by the Transfer Agent (an "Authorized Participant > Agreement"). --- 1350,1354c1435,1442 ----------------------- < account with the Custodian. Authorized Participant Agreements provide < the procedures for the creation and redemption of Baskets and for < the delivery of bitcoin required for such creations or redemptions. A < list of the current Authorized Participants can be obtained from the < Administrator or the Sponsor. > account with the Custodian. > In addition, Authorized Participants may, but are not required > to, participate in the daily 4:00 p.m. auction on the Gemini > Exchange. Authorized Participant Agreements provide the procedures > for the creation and redemption of Baskets and for the delivery of > bitcoin required for such creations or redemptions. A list of the > current Authorized Participants can be obtained from the Administrator > or the Sponsor. --- 1357,1360d1444 ----------------------- < 11 < < Table of Contents < --- 1364,1365c1447,1448 ----------------------- < the Trust Agency Service Provider will issue to DTC. The Shares will < be available only in book-entry form. > the Transfer Agent will issue to DTC. The Shares will be available > only in book-entry form. --- 1369a1453,1456 ----------------------- > 12 > > Table of Contents > --- 1382,1383c1469,1471 ----------------------- < (Basket), may be redeemed at a holder's request by the Trust which < will distribute to the redeeming holder the quantity of bitcoin. > (Basket), may be redeemed at an Authorized Participant's request by > the Trust which will distribute to the redeeming Authorized Participant > the quantity of bitcoin. --- 1387c1475 ----------------------- < As of the close of business on [ ], 2016, the net asset value of the > As of the close of business on [ ], 2017, the net asset value of the --- 1392c1480 ----------------------- < See "Statement of Financial Condition" elsewhere in this prospectus. > See "Statement of Assets and Liabilities" elsewhere in this prospectus. --- 1394c1482 ----------------------- < 12 > 13 --- 1408c1496 ----------------------- < through, the decentralized,open source protocol of the peer-to-peer > through, the decentralized, open source protocol of the peer-to-peer --- 1412,1413c1500,1501 ----------------------- < entity owns or operates the Bitcoin Network, the infrastructure of < which is collectively maintained by a decentralized user base > entity owns or operates the Bitcoin Network; the infrastructure is > collectively maintained by a decentralized user base --- 1421,1422c1509,1510 ----------------------- < file stored in a decentralized manner on the computers of each Bitcoin < Network user. > record stored in a decentralized manner on the computers of each > Bitcoin Network user. --- 1436c1524 ----------------------- < public Bitcoin address. A Bitcoin"wallet" is a collection of private > public Bitcoin address. A Bitcoin "wallet" is a collection of private --- 1439c1527 ----------------------- < The Blockchain is comprised of a digital file, downloaded and > The Blockchain is comprised of a digital record, downloaded and --- 1480c1568 ----------------------- < 13 > 14 --- 1527,1529c1615,1619 ----------------------- < A Digital Asset such as bitcoin may be used, among other things, to < buy and sell goods and services are a new and rapidly evolving industry < of which the Bitcoin Network is a prominent, but not unique, part. > A Digital Asset such as bitcoin may be used, among other things, > to buy and sell goods and services. > The Bitcoin Network and other Digital Asset networks are a new and > rapidly evolving industry of which the Bitcoin Network is a prominent, > but not unique, part. --- 1568c1658 ----------------------- < 14 > 15 --- 1578,1585c1668,1675 ----------------------- < Network have only recently become widely accepted as a means of payment < for goods and services by many major retail and commercial outlets, < and use of bitcoin by consumers to pay such retail and commercial < outlets remains limited. Banks and other established financial < institutions may refuse to process funds for Bitcoin transactions, < process wire transfers to or from bitcoin exchanges, Bitcoin-related < companies or service providers, or maintain accounts for persons or < entities transacting in bitcoin. > Network have only recently become selectively accepted as a means of > payment for goods and services by many major retail and commercial > outlets, and use of bitcoin by consumers to pay such retail and > commercial outlets remains limited. Banks and other established > financial institutions may refuse to process funds for Bitcoin > transactions; process wire transfers to or from bitcoin exchanges, > Bitcoin-related companies or service providers; or maintain accounts > for persons or entities transacting in bitcoin. --- 1594,1595c1684,1686 ----------------------- < a reduction in the Gemini Exchange Spot Price, either of which could < adversely impact an investment in the Shares. > a reduction in > the Gemini Exchange Auction Price, either of which could adversely > impact an investment in the Shares. --- 1606c1697 ----------------------- < on Github.com. > on Github. --- 1615c1706 ----------------------- < forums including GitHub.com and Bitcointalk.org. > forums. --- 1628,1630c1719,1728 ----------------------- < If less than a significant majority of the users and miners on the < Bitcoin Network install such software upgrade(s), the Bitcoin Network < could "fork." > In the event a developer or group of developers proposes a modification > to the Bitcoin Network that is not accepted by a majority of miners > and users, but that is nonetheless accepted by a substantial plurality > of miners and users, two or more competing and incompatible Blockchain > implementations could result. > This is known as a "hard fork." > In such a case, the "hard fork" in the Blockchain could materially > and adversely affect the perceived value of bitcoin as reflected on > one or both incompatible Blockchains, and thus the value of the > Trust's bitcoin. --- 1632,1633c1730,1731 ----------------------- < or upgrades by a significant, but not overwhelming, percentage of < the users and miners in the Bitcoin Network could result in a 'fork' > or upgrades by a significant, but not overwhelming, percentage of the > users and miners in the Bitcoin Network could result in a 'hard fork' --- 1648,1649c1746,1747 ----------------------- < GitHub.com. As an open source project, Bitcoin is not represented by < an official organization or authority. As the Bitcoin Network protocol > GitHub. As an open source project, Bitcoin is not represented by an > official organization or authority. As the Bitcoin Network protocol --- 1651,1655d1748 ----------------------- < contributors are generally not compensated for maintaining and updating < the Bitcoin Network protocol. < Although the MIT Media Lab's Digital Currency Initiative funds the < current maintainer Wladimir J. van der Laan, among others, this type < of financial incentive is not typical. The lack of guaranteed financial --- 1657c1750 ----------------------- < 15 > 16 --- 1660a1754,1758 ----------------------- > contributors are generally not compensated for maintaining and updating > the Bitcoin Network protocol. > Although the MIT Media Lab's Digital Currency Initiative funds the > current maintainer Wladimir J. van der Laan, among others, this type of > financial incentive is not typical. The lack of guaranteed financial --- 1674,1678c1772,1776 ----------------------- < (referred to herein as "aggregate hashrate") dedicated to mining on < the Bitcoin Network, it will be able to exert unilateral control over < the addition of blocks to the Blockchain. As long as the malicious < actor enjoys this majority it may be able to "double-spend" its own < bitcoin (i.e., spend the same bitcoin in more than one transaction) > (referred to herein as "aggregate hashrate") dedicated to mining on the > Bitcoin Network, it will be able to exert unilateral control over the > addition of blocks to the Blockchain. As long as the malicious actor > enjoys this majority it may be able to "double-spend" its own bitcoin > (i.e., spend the same bitcoin in two or more conflicting transactions) --- 1703c1801 ----------------------- < Additionally, there are some academics and market participants that > Additionally, there are some academics and market participants who --- 1724,1727c1822,1824 ----------------------- < twenty-five (25) bitcoin per block, and, consistent with Bitcoin < protocol, the reward will decrease by half to become twelve and a half < (12.5) bitcoin on or around the start of July 2016 (based on estimates < of the rate of block solution calculated by BitcoinClock.com). > twelve and a half (12.5) bitcoin per block; the reward decreased from > twenty-five (25) bitcoin in July 2016. It is estimated that it will > halve again in about four (4) years. --- 1738,1745c1835,1836 ----------------------- < the difficulty for block solutions so that solution speeds remain < in the vicinity of the expected ten (10) minute confirmation time < targeted by the Bitcoin Network protocol. < The Sponsor believes that from time to time there will be further < considerations and adjustments to the Bitcoin Network regarding the < difficulty for block solutions. < More significant reductions in aggregate hashrate on the Bitcoin < Network could result in material, though temporary, > the difficulty for block solutions so that solution speeds remain in > the vicinity of the expected ten (10) minute --- 1747c1838 ----------------------- < 16 > 17 --- 1751c1842,1848 ----------------------- < delays in block solution confirmation time. > confirmation time targeted by the Bitcoin Network protocol. > The Sponsor believes that from time to time there will be further > considerations and adjustments to the Bitcoin Network regarding the > difficulty for block solutions. > More significant reductions in aggregate hashrate on the Bitcoin > Network could result in material, though temporary, delays in block > solution confirmation time. --- 1771,1779c1868,1876 ----------------------- < This transition could be accomplished by miners independently electing < to record in the blocks they solve only those transactions that < include payment of a transaction fee. If transaction fees paid for < Bitcoin transactions become too high, the marketplace may be reluctant < to accept bitcoin as a means of payment and existing users may be < motivated to switch from bitcoin to another Digital Asset or back < to fiat currency. Decreased use and demand for bitcoin may adversely < affect their value and result in a reduction in the Gemini Exchange < Spot Price and the price of the Shares. > This transition could be accomplished by miners independently > electing to record in the blocks they solve only those transactions > that include payment of a transaction fee. If transaction fees paid > for Bitcoin transactions become too high, the marketplace may be > reluctant to accept bitcoin as a means of payment and existing users > may be motivated to switch from bitcoin to another Digital Asset > or back to fiat currency. Decreased use and demand for bitcoin may > adversely affect their value and result in a reduction in > the Gemini Exchange Auction Price and the price of the Shares. --- 1782,1783c1879,1880 ----------------------- < are not high, operators of Bitcoin mining operations are more likely < to immediately sell bitcoin earned by mining in the Bitcoin Exchange > are low, operators of Bitcoin mining operations are more likely to > immediately sell bitcoin earned by mining in the Bitcoin Exchange --- 1789,1790c1886,1887 ----------------------- < processing units and first generation ASIC (application-specific < integrated circuit) machines ("ASICs"). Currently, new hashrate brought > processing units and first-generation application-specific integrated > circuit processors ("ASICs"). Currently, new hashrate brought --- 1793,1798c1890,1895 ----------------------- < mining operations may use proprietary hardware or sophisticated ASICs < acquired from ASIC manufacturers. They require the investment of < significant capital for the acquisition of this hardware, the leasing < of operating space (often in data centers or warehousing facilities), < incurring of electricity costs and the employment of technicians to < operate the mining farms. > mining operations may use proprietary hardware or sophisticated and > customized ASICs. They require the investment of significant capital > for the acquisition of this hardware, the leasing of operating space > (often in data centers or warehousing facilities), incurring of > electricity costs and the employment of technicians to operate the > mining farms. --- 1819,1830c1916,1921 ----------------------- < percentage of the three thousand six hundred (3,600) to four thousand < two hundred (4,200) new bitcoin mined each day will be sold into < the Bitcoin Exchange Market more rapidly, thereby reducing bitcoin < prices. Lower bitcoin prices will result in further tightening of < profit margins, particularly for professionalized mining operations < with higher costs and more limited capital reserves, creating a < network effect that may further reduce the price of bitcoin until < mining operations with higher operating costs become unprofitable < and remove mining power from the Bitcoin Network. < The network effect of reduced profit margins resulting in greater < sales of newly mined bitcoin could result in a reduction in the price < of bitcoin that could adversely impact an investment in the Shares. > percentage could be sold into the Bitcoin Exchange Market more rapidly, > thereby potentially reducing bitcoin prices. Lower bitcoin prices > could result in further tightening of profit margins, particularly for > professionalized mining operations with higher costs and more limited > capital reserves, creating a network effect that may further reduce the > price of bitcoin until mining operations with higher operating costs --- 1832c1923 ----------------------- < 17 > 18 --- 1835a1927,1931 ----------------------- > become unprofitable and remove mining power from the Bitcoin Network. > The network effect of reduced profit margins resulting in greater > sales of newly mined bitcoin could result in a reduction in the price > of bitcoin that could adversely impact an investment in the Shares. > --- 1861,1863c1957,1959 ----------------------- < in the Bitcoin Network could result in a "fork" in the Blockchain, < resulting in the operation of two separate networks until such time < as the forked Blockchains are merged. > in the Bitcoin Network could result in a "hard fork" in the Blockchain, > resulting in the operation of two separate and incompatible networks > until such time as the forked Blockchains are merged, if ever. --- 1868,1869c1964,1965 ----------------------- < group of contributors in the Bitcoin community, there is no official < developer or group of developers that formally controls the Bitcoin > group of contributors in the Bitcoin community, there is no designated > developer or group of developers who formally control the Bitcoin --- 1872,1880c1968,1975 ----------------------- < miners on the Bitcoin Network through software downloads and upgrades, < typically posted to the Bitcoin development forum on GitHub.com. A < substantial majority of miners and Bitcoin users must consent to < those software modifications by downloading the altered software or < upgrade that implements the changes; otherwise, the changes do not < become a part of the Bitcoin Network. < Since the Bitcoin Network's inception, changes to the Bitcoin Network < have been accepted by the vast majority of users and miners, ensuring < that the Bitcoin Network remains a coherent economic system; > miners on the Bitcoin Network through modifications typically posted > to the Bitcoin development forum on GitHub. A substantial majority of > miners and Bitcoin users must affect those software modifications; > otherwise, such miners and Bitcoin users would become substantially > less relevant to the overall Bitcoin Network. > Since the Bitcoin Network's inception, modifications to the Bitcoin > Network have been accepted by the vast majority of users and miners, > ensuring that the Bitcoin Network remains a coherent economic system; --- 1884,1896c1979,2009 ----------------------- < substantial population of participants in the Bitcoin Network. < In such a case, and if the modification is material and/or not < backwards compatible with the prior version of Bitcoin Network < software, a fork in the Blockchain could develop and two (2) separate < Bitcoin Networks could result, one running the pre-modification < software program and the other running the modified version (i.e., < a second "Bitcoin" network). Such a fork in the Blockchain typically < would be addressed by community-led efforts to merge the forked < Blockchains, and several prior forks have been so merged. < This kind of split in the Bitcoin Network could materially and < adversely affect the Gemini Exchange Spot Price (and thus the value of < the Shares) and, in the worst case scenario, harm the sustainability < of the Bitcoin Network's economy. > substantial plurality of miners and users. > In such a case, and if the modification is not compatible with the > dominant implementation of Bitcoin Network software, a deviation or > "hard fork" in the Blockchain could develop, and two separate Bitcoin > Networks could result, one running the pre-modification software > program and the other running the modified version (i.e., a second > "Bitcoin network"). Such a hard fork in the Blockchain typically > would be addressed by community-led efforts to reunite the forked > Blockchains, and several prior forks have been resolved successfully. > However, a Digital Asset network fork of this kind could materially > and adversely affect the perceived value of bitcoin as reflected on > one or both incompatible Blockchains. > The Sponsor and the Custodian will work with members of the Bitcoin > Network, including the core developers, to attempt to resolve any > Digital Asset network fork promptly and in a manner that is protective > of the > Trust's assets. > This kind of split in the Bitcoin Network also could materially and > adversely affect > the Gemini Exchange Auction Price (and thus the value of the Shares) > and, in the worst case scenario, harm the sustainability of the > Bitcoin Network's economy. > Additionally, a Digital Asset hard fork will decrease the number > of users and miners available to each fork of the Blockchain as the > users and miners on each fork Blockchain will not be assessable to > the other Blockchain. > > Because proposed modifications are affected at a particular Blockchain > block number, it is possible to forecast the approximate date and > time of its implementation. > In the event of an upcoming modification to the --- 1898,1899c2011 ----------------------- < Intellectual property rights claims may adversely affect the operation < of the Bitcoin Network. > 19 --- 1901c2013,2047 ----------------------- < Third parties may assert intellectual property claims relating > Table of Contents > > Bitcoin Network that could potentially result in a hard fork with > two separate and incompatible Bitcoin Networks, the Custodian, > in consultation with the Sponsor, will elect to support the Bitcoin > Network that has the greatest cumulative computational difficulty for > the forty-eight (48) hour period following a given hard fork, in order > to engage in bitcoin transactions and the valuation of bitcoin. During > this forty-eight (48) hour period and for the twenty-four (24) > hour period prior to the anticipated fork, creation and redemption > of baskets will be halted. The greatest cumulative computational > difficulty is defined as the total threshold number of hash attempts > required to mine all existing blocks in the respective Blockchain, > accounting for potential differences in relative hash difficulty. > If the Custodian, in consultation with the Sponsor, is unable to make a > conclusive determination about which Bitcoin Network has the greatest > cumulative computational difficulty after forty-eight (48) hours, > or determines in good faith that this is not a reasonable criterion > upon which to make a determination, the Custodian will support the > Bitcoin Network which it deems in good faith is most likely to be > supported by a greater number of users and miners. > Under the terms of the Trust Custody Agreement, the Trust may > be required to indemnify the Custodian for any losses arising in > connection with its determination to elect the Bitcoin Network with > the greatest computational difficulty in the event of a hard fork. > > If, at or after the time of such election, users' and miners' support > of the selected Bitcoin Network diminishes, this could adversely > affect the value of the > Trust's bitcoin and the value of an investment in the Shares. > > Intellectual property rights claims may adversely affect the operation > of the Bitcoin Network. > > Third parties may assert intellectual property claims relating --- 1918,1921d2063 ----------------------- < 18 < < Table of Contents < --- 1929,1930c2071,2072 ----------------------- < bitcoin, as measured at 4:00 p.m. Eastern Time using Gemini Exchange < Spot Price on each Business Day, less the > bitcoin, as measured at 4:00 p.m. Eastern Time using > the Gemini Exchange Auction Price on each Business Day, less the --- 1932c2074 ----------------------- < expenses). The value of the Shares are directly related to the value > expenses). The value of the Shares is directly related to the value --- 1936,1937c2078,2079 ----------------------- < Several factors may affect the Gemini Exchange Spot Price, including, < but not limited to: > Several factors may affect > the Gemini Exchange Auction Price, including, but not limited to: --- 1939c2081 ----------------------- < o Global bitcoin supply; > o Total bitcoin in existence; --- 1943,1946c2085,2096 ----------------------- < for goods and services, the security of online Bitcoin Exchanges < and public Bitcoin addresses that hold bitcoin, the perception that < the use and holding of bitcoin is safe and secure, and the lack of < regulatory restrictions on their use; > for goods and services, the security of online Bitcoin Exchanges and > public Bitcoin addresses that hold bitcoin, the perception that the > use and holding of bitcoin is safe and secure, the lack of regulatory > restrictions on their use, and the reputation regarding the use of > bitcoin for illicit purposes; > > o Global bitcoin supply, which is influenced by similar factors as > global bitcoin demand, in addition to fiat currency needs by miners and > taxpayers who may liquidate bitcoin holdings to meet tax obligations; > > o Investors' expectations with respect to the rate of inflation of > fiat currencies; --- 1948c2098,2101 ----------------------- < o Investors' expectations with respect to the rate of inflation; > 20 > > Table of Contents > o Investors' expectations with respect to bitcoin's rate of deflation; --- 1958c2111,2118 ----------------------- < o Interruptions in service from or failures of the Gemini Exchange; > o Interruptions in service from or failures of the Gemini Exchange > (interruptions or failures at other Bitcoin Exchanges may also have > an indirect affect); > > o > Theft, or news of such theft, of bitcoin from individuals or bitcoin > retail and service providers, including companies that buy, sell, > process payments or store bitcoin; --- 1969a2130,2131 ----------------------- > o The availability of companies providing bitcoin-related services; > --- 1972a2135,2137 ----------------------- > o Increased competition from other forms of Digital Assets or means > of payments; > --- 1974c2139 ----------------------- < situations; and > situations; --- 1977c2142 ----------------------- < bitcoin will soon change. > bitcoin will soon change; and --- 1979,1980c2144,2148 ----------------------- < In addition, investors should be aware that there is no assurance that < bitcoin will maintain their long-term value in terms of purchasing > o Fees, including miners' fees, associated with processing bitcoin > transactions. > > In addition, investors should be aware that there is no assurance > that bitcoin will maintain its long-term value in terms of purchasing --- 1987c2155 ----------------------- < The Gemini Exchange Spot Price may be subject to momentum pricing, > The Gemini Exchange Auction Price may be subject to momentum pricing, --- 1996,1997c2164,2165 ----------------------- < in the value of bitcoin, inflating and making more volatile the value < of a bitcoin. > in the value of bitcoin, inflating the price of bitcoin and making > it more volatile. --- 1999,2001c2167,2169 ----------------------- < changing investor confidence in future appreciation in the Gemini < Exchange Spot Price, which could adversely affect an investment in < the Shares. > changing investor confidence in future appreciation in > the Gemini Exchange Auction Price, which could adversely affect an > investment in the Shares. --- 2007,2015c2175,2177 ----------------------- < on October 8, 2015. The data inputs include trade time, price and < volume. The calculation of the Gemini Exchange Spot Price as of 4:00 < p.m. Eastern < < 19 < < Table of Contents < < time on each Business Day will be used for the calculation of the > on October 8, 2015. The calculation of > the Gemini Exchange Auction Price as of 4:00 p.m. Eastern Time on > each Business Day will be used for the calculation of the --- 2022,2023c2184,2191 ----------------------- < have been volatile and subject to influence by many factors including < the levels of liquidity on Bitcoin Exchanges. > have been volatile > > 21 > > Table of Contents > > and subject to influence by many factors including the levels of > liquidity on Bitcoin Exchanges. --- 2027,2030c2195,2201 ----------------------- < and/or malware, and its permanent closure in February 2014), limiting < the liquidity of bitcoin on the Bitcoin Exchange Market and resulting < in volatile prices and a reduction in confidence in the Bitcoin < Network and the Bitcoin Exchange Market. > and/or malware, and its permanent closure in February 2014). > In addition, in August 2016, a security breach at Bitfinex, a large, > Hong Kong based Bitcoin Exchange, resulted in the loss of one hundred > twenty thousand (120,000) bitcoin. Events such as these may limit > the liquidity of bitcoin on the Bitcoin Exchange Market and result in > volatile prices and a reduction in confidence in the Bitcoin Network > and the Bitcoin Exchange Market. --- 2091,2092c2262,2264 ----------------------- < Exchanges' failures may result in a reduction in the Gemini Exchange < Spot Price and can adversely affect an investment in the Shares. > Exchanges' failures may result in a reduction in > the Gemini Exchange Auction Price and can adversely affect an > investment in the Shares. --- 2099c2271,2276 ----------------------- < structure, > structure, management teams, corporate practices or regulatory > compliance. > As a result, the marketplace may lose confidence in or may experience > problems relating to Bitcoin Exchanges, including prominent exchanges > handling a significant portion of the volume of bitcoin trading > . Bitcoin Exchanges may impose daily, weekly, --- 2101c2278 ----------------------- < 20 > 22 --- 2105,2112c2282,2284 ----------------------- < management teams, corporate practices or regulatory compliance. < As a result, the marketplace may lose confidence in, or may experience < problems relating to, Bitcoin Exchanges, including prominent exchanges < handling a significant portion of the volume of bitcoin trading < . Bitcoin Exchanges may impose daily, weekly, monthly or < customer-specific transaction or distribution limits or suspend < withdrawals entirely, rendering the exchange of virtual currency for < fiat currency difficult or impossible > monthly or customer-specific transaction or distribution limits, or > the Bitcoin Exchanges may suspend withdrawals entirely, rendering the > exchange of virtual currency for fiat currency difficult or impossible --- 2124,2127c2296,2299 ----------------------- < The Gemini Exchange Spot Price is used to determine the NAV as measured < at 4:00 p.m., Eastern time on each Business Day. The Gemini Exchange, < an affiliate of the Sponsor, is owned and operated by Gemini Trust < Company, LLC, the > The Gemini Exchange Auction Price is used to determine the NAV as > measured at 4:00 p.m. Eastern Time on each Business Day. The Gemini > Exchange, an affiliate of the Sponsor, is owned and operated by Gemini > Trust Company, LLC, the --- 2155c2327 ----------------------- < in the Gemini Exchange Spot Price. > in the pricing on the Gemini Exchange. --- 2158c2330 ----------------------- < determine the NAV on a Business Day. > calculate the NAV on a Business Day. --- 2180,2182c2352,2354 ----------------------- < increased ahead of the protocol's schedule. As of April 28, 2016, < approximately fifteen million, four hundred eighty-two thousand three < hundred (15,482,300) bitcoin had been created. > increased ahead of the protocol's schedule. As of February 1, 2017, > approximately sixteen million, one hundred thousand (16,100,000) > bitcoin had been created. --- 2188a2361,2363 ----------------------- > the Gemini Exchange Auction Price, which would directly affect the > price at which the Shares are traded or the price of future Baskets > created or redeemed by the Trust. --- 2190c2365 ----------------------- < 21 > 23 --- 2194,2200c2369,2371 ----------------------- < the Gemini Exchange Spot Price, which would directly affect the price < at which the Shares are traded on Bats or the price of future Baskets < created or redeemed by the Trust. < < As of [ ], 2016, the Trust held approximately [10,000] bitcoin that < it acquired in the sale of the Seed Baskets on [ ], 2016, representing < approximately 0.[06] percent of the [ ], 2016 world bitcoin supply. > As of [ ], 2017, the Trust held approximately [10,000] bitcoin that > it acquired in the sale of the Seed Baskets on [ ], 2017, representing > approximately 0.[06] percent of the [ ], 2017 world bitcoin supply. --- 2203,2204c2374,2376 ----------------------- < impact on the Gemini Exchange Spot Price, thereby affecting Share < trading prices. > impact on > the Gemini Exchange Auction Price, thereby affecting Share trading > prices. --- 2211,2212c2383,2386 ----------------------- < hours between Bats and various Bitcoin Exchanges, including the Gemini < Exchange. While Bats is open for trading in the Shares for a limited > hours between Bats and various Bitcoin Exchanges, including the > Gemini Exchange. > Additionally, Shares may be traded at other times and in other > venues. While Bats is open for trading in the Shares for a limited --- 2239,2240c2413,2414 ----------------------- < a difference in performance between the price of bitcoin as measured < by the Gemini Exchange Spot Price and the most recent Share price. > a difference in performance between the price of bitcoin as measured by > the Gemini Exchange Auction Price and the most recent Share price. --- 2243,2245c2417,2419 ----------------------- < Market, and the value of bitcoin as measured by the Gemini Exchange < Spot Price, moves significantly in a negative direction after the < close of U.S equity markets, the trading price of the Shares may "gap" > Market, and the value of bitcoin as measured by pricing on the Gemini > Exchange, moves significantly in a negative direction after the close > of U.S equity markets, the trading price of the Shares may "gap" --- 2275c2449 ----------------------- < 22 > 24 --- 2280,2281c2454,2456 ----------------------- < Basket creation or selling activity following Basket redemption may < affect the Gemini Exchange Spot Price and Share trading prices. > Basket creation or selling activity following Basket redemption > may affect > the Gemini Exchange Auction Price and Share trading prices. --- 2294,2296c2469,2470 ----------------------- < after Baskets are created. < If the Gemini Exchange Spot Price declines, the trading price of the < Shares will generally also decline. > after Baskets are created. If pricing on the Gemini Exchange declines, > the trading price of the Shares will generally also decline. --- 2304,2310c2478,2480 ----------------------- < If the Gemini Exchange Spot Price declines, the trading price of < the Shares will generally also decline. To monitor this issue, under < applicable Bats rules, the Sponsor has created an independent committee < to consider, at least quarterly, whether the holdings of the Trust, < and the buying and selling activities of Authorized Participants in < connection with creating and redeeming Shares, have had a material < impact on the market price of the Shares or bitcoin. > If > the Gemini Exchange Auction Price declines, the trading price of the > Shares will generally also decline. --- 2326c2496 ----------------------- < The Gemini Exchange Spot Price may be affected by the sale of other > The Gemini Exchange Auction Price may be affected by the sale of other --- 2335,2336c2505,2506 ----------------------- < holding bitcoin, could negatively affect the Gemini Exchange Spot < Price and the NAV. > holding bitcoin, could negatively affect > the Gemini Exchange Auction Price and the NAV. --- 2339,2340c2509,2511 ----------------------- < which could result in a reduction in the Gemini Exchange Spot Price < and adversely affect an investment in the Shares. > which could result in a reduction in > the Gemini Exchange Auction Price and adversely affect an investment > in the Shares. --- 2345,2355c2516,2522 ----------------------- < of an alternative, decentralized means of buying and selling goods < and services, and it is unclear how such supply and demand will be < impacted by geopolitical events. Nevertheless, political or economic < crises may motivate large-scale acquisitions or sales of bitcoin either < globally or locally. Large-scale sales of bitcoin would result in a < reduction in the Gemini Exchange Spot Price and adversely affect an < investment in the Shares. < < 23 < < Table of Contents > of an alternative, decentralized means of buying and selling goods and > services, and it is unclear how such supply and demand will be impacted > by geopolitical events. Nevertheless, political or economic crises may > motivate large-scale acquisitions or sales of bitcoin either globally > or locally. Large-scale sales of bitcoin would result in a reduction in > the Gemini Exchange Auction Price and adversely affect an investment > in the Shares. --- 2368,2370c2535,2542 ----------------------- < largest user and investor base and the largest number of miners and, < consequently, the largest aggregate hashrate securing the Blockchain < and verifying its transactions. > largest user and investor base and the largest > > 25 > > Table of Contents > > number of miners and, consequently, the largest aggregate hashrate > securing the Blockchain and verifying its transactions. --- 2380,2384c2552,2556 ----------------------- < As of May 2016, there were approximately seven hundred (700) alternate < Digital Assets (or altcoins) tracked by CoinMarketCap.com, having < a total market capitalization (including the market capitalization < of bitcoin) of approximately $8.41 billion, using market prices and < total available supply of each Digital Asset. > As of February 1, 2017, there were approximately six hundred and > fifty (650) alternate Digital Assets (or altcoins) tracked by > CoinMarketCap, having a total market capitalization (including the > market capitalization of bitcoin) of approximately $17 billion, > using market prices and total available supply of each Digital Asset. --- 2388,2399c2560,2563 ----------------------- < (e.g., Peercoin, Bitshares and NXT). < As of May 2, 2016, bitcoin's $6.87 billion market capitalization was < nearly eight (8) times larger than the $790 million market cap of Ether < (the second largest proof of work Digital Asset). < As of May 13, 2016, it can be estimated that the amount of computing < resources devoted to Bitcoin is approximately thirty (30) times < larger than the amount of resources devoted to Litecoin based on the < U.S. Dollar value of all mining rewards in the previous twenty-four < hours. < As of May 10, 2016, Litecoin had a market cap of approximately $177 < million according to CoinMarketCap.com. < > (e.g., Peercoin, Bitshares and NXT). As of February 1, 2017, bitcoin's > $15.4 billion market capitalization was more than sixteen (16) times > the size of the $900 million market cap of Ether, the second largest > proof-of-work Digital Asset. --- 2429c2593 ----------------------- < The Trust Invests Solely in Bitcoin. > The Trust invests solely in bitcoin. --- 2431,2432c2595,2597 ----------------------- < Other than cash held for working capital purposes, the Trust will < invest solely in bitcoin, which is a new and highly speculative asset. > Other than cash temporarily held to pay the > Trust's expenses or for similar purposes, the Trust will invest solely > in bitcoin, which is a new and highly speculative asset. --- 2437,2443c2602 ----------------------- < by an < < 24 < < Table of Contents < < investor. > by an investor. --- 2461c2620,2626 ----------------------- < or issues with respect to the mechanics of the > or issues with > > 26 > > Table of Contents > > respect to the mechanics of the --- 2474,2475c2639,2640 ----------------------- < The Shares may trade on Bats at, above or below the NAV. The NAV will < fluctuate with changes in the market value of the > The Shares may trade at, above or below the NAV. The NAV will fluctuate > with changes in the market value of the --- 2482c2647 ----------------------- < influencing the Gemini Exchange Spot Price. > influencing pricing on the Gemini Exchange. --- 2497,2499c2662,2665 ----------------------- < If Authorized Participants are able to purchase or sell large amounts < of bitcoin in the open market at prices that are different than the < Gemini Exchange Spot Price, > If Authorized Participants are able to purchase or sell large > quantities of bitcoin in the open market at prices that are different > than > the Gemini Exchange Auction Price, --- 2501,2514c2667,2686 ----------------------- < closely linked to the Gemini Exchange Spot Price may not function < properly and the Shares may trade at a discount or premium to the NAV. < < The arbitrage mechanism on which the Trust relies to keep the price of < the Shares closely linked to the Gemini Exchange Spot Price may not < function properly if Authorized Participants are able to purchase or < sell large amounts of bitcoin in the open market at prices that are < materially higher or lower than the Gemini Exchange Spot Price. < Although the Gemini Exchange Spot Price is designed to accurately < capture the market price of bitcoin, Authorized Participants may < purchase bitcoin for creation units or sell bitcoin from creation < unit redemptions on public or private markets and not on the Gemini < Exchange, and such transactions may take place at prices materially < higher or lower than the Gemini Exchange Spot Price. > closely linked to > the Gemini Exchange Auction Price may not function properly and the > Shares may trade at a discount or premium to the NAV. > > The arbitrage mechanism on which the Trust relies to keep the price > of the Shares closely linked to > the Gemini Exchange Auction Price may not function properly if > Authorized Participants are able to purchase or sell large quantities > of bitcoin in the open market at prices that are materially higher > or lower than > the Gemini Exchange Auction Price > . Authorized Participants are permitted to, but not obligated to, > participate in the 4:00 p.m. auction on the Gemini Exchange. > Although > the Gemini Exchange Auction Price is designed to accurately capture the > market price of bitcoin, Authorized Participants may purchase bitcoin > for creation units or sell bitcoin from creation unit redemptions on > public or private markets and not on the Gemini Exchange, and such > transactions may take place at prices materially higher or lower than > the Gemini Exchange Auction Price. --- 2516,2518c2688,2690 ----------------------- < of a bitcoin at any given time, the prices on other Bitcoin Exchanges < may not be equal to the value of a bitcoin as represented by the < Gemini Exchange Spot Price. > of bitcoin at any given time, the prices on other Bitcoin Exchanges > may not be equal to the value of a bitcoin as represented by > the Gemini Exchange Auction Price. --- 2520,2521c2692,2694 ----------------------- < used by an Authorized Participant could be materially higher or lower < than the Gemini Exchange Spot Price. > used by an Authorized Participant could be materially higher or > lower than > the Gemini Exchange Auction Price. --- 2525,2541c2698,2711 ----------------------- < or sell large amounts of bitcoin. < To the extent such prices differ materially from the Gemini Exchange < Spot Price, the price of the Shares may no longer track, whether < temporarily or over time, the Gemini Exchange Spot Price, < < 25 < < Table of Contents < < which could adversely impact an investment in the Trust by reducing < investors' confidence in the Shares' ability to track the market < price of bitcoin and the Gemini Exchange Spot Price. < If the Trust accepts cash from Authorized Participants for creations, < or agrees to provide cash to redeeming Authorized Participants, there < is no guarantee that the Trust will be able to achieve a better than < average market price for bitcoin or will purchase bitcoin at the most < favorable price available. > or sell large quantities of bitcoin. > To the extent such prices differ materially from > the Gemini Exchange Auction Price, the price of the Shares may no > longer track, whether temporarily or over time, > the Gemini Exchange Auction Price, which could adversely impact an > investment in the Trust by reducing investors' confidence in the > Shares' ability to track the market price of bitcoin and > the Gemini Exchange Auction Price. > Since the auction on the Gemini Exchange was first implemented on > September 21, 2016 through February 1, 2017, > the Gemini Exchange Auction Price has deviated from the median > worldwide U.S. dollar-denominated Bitcoin Exchange price at 4:00 > p.m. Eastern Time by 0.27% on average and 0.91% at most (0.16% on > average and 0.74% at most in the U.S.) on Business Days. --- 2551a2722,2725 ----------------------- > 27 > > Table of Contents > --- 2554,2555c2728,2729 ----------------------- < transactions intended to keep the price of the Shares closely linked < to the Gemini Exchange Spot Price may not exist and, as a result, > transactions intended to keep the price of the Shares closely linked to > the Gemini Exchange Auction Price may not exist and, as a result, --- 2559c2733 ----------------------- < depend on timely transfers of bitcoin to and from the custody accounts > depend on timely transfers of bitcoin to and from the accounts --- 2572,2573c2746,2747 ----------------------- < price of the Shares may fluctuate independently of the Gemini Exchange < Spot Price and may fall. > price of the Shares may fluctuate independently of > the Gemini Exchange Auction Price and may fall. --- 2577,2578c2751,2752 ----------------------- < the Trust Servicing Agreement, may adversely affect an investment in < the Shares. > the Transfer Agency and Services Agreement, may adversely affect an > investment in the Shares. --- 2580,2583c2754,2756 ----------------------- < Under the Trust Servicing Agreement, the Administrator or Sponsor < may postpone, suspend or reject Creation Basket orders or Redemption < Basket orders, as applicable, for a variety of permitted reasons < under certain circumstances. > The Administrator or Sponsor may postpone, suspend or reject Creation > Basket orders or Redemption Basket orders, as applicable, for a > variety of permitted reasons under certain circumstances. --- 2589,2590c2762,2763 ----------------------- < Shares to the value of the underlying bitcoin, as measured using the < Gemini Exchange Spot Price. > Shares to the value of the underlying bitcoin, as measured using > the Gemini Exchange Auction Price. --- 2592,2593c2765,2766 ----------------------- < price of the Shares may fluctuate independently of the Gemini Exchange < Spot Price and may fall. > price of the Shares may fluctuate independently of > the Gemini Exchange Auction Price and may fall. --- 2598,2599c2771,2772 ----------------------- < The Cold Storage System has been designed specifically to provide < security for the > The Custodian's Cold Storage System has been designed specifically > to provide security for the --- 2623,2631c2796,2798 ----------------------- < depend on administration by the Custodian and the ability of < < 26 < < Table of Contents < < the Cold Storage System to store, accept and distribute data relating < to bitcoin and the public Bitcoin addresses that the Trust transfers < such bitcoin. > depend on administration by the Custodian and the ability of the Cold > Storage System to store, accept and distribute data relating to bitcoin > and the public Bitcoin addresses that the Trust transfers such bitcoin. --- 2643a2811,2814 ----------------------- > 28 > > Table of Contents > --- 2697c2868 ----------------------- < internet-connected) protocols reasonably designed to safeguard the > internet-connected) protocols is reasonably designed to safeguard the --- 2702,2704c2873 ----------------------- < or act of God will be borne by the Trust, absent gross negligence, < willful misconduct or bad faith on the part of the Sponsor, the < Custodian or their agents. > or act of God generally will be borne by the Trust. --- 2720,2728c2889,2892 ----------------------- < unauthorized access, disable or degrade service, < < 27 < < Table of Contents < < or sabotage systems change frequently, or may be designed to remain < dormant until a predetermined event and often are not recognized < until launched against a target, > unauthorized access, disable or degrade service, or sabotage systems > change frequently, or may be designed to remain dormant until a > predetermined event and often are not recognized until launched > against a target, --- 2740a2905,2908 ----------------------- > 29 > > Table of Contents > --- 2780c2948 ----------------------- < in incorrect amounts or to unauthorized third parties. > in incorrect quantities or to unauthorized third parties. --- 2816,2819d2983 ----------------------- < 28 < < Table of Contents < --- 2821,2822c2985 ----------------------- < Trustee, Sponsor, Administrator, Trust Agency Service Provider and < Custodian and the > Trustee, Sponsor, Administrator, Transfer Agent and Custodian and the --- 2827,2832c2990,3006 ----------------------- < The Trust will not insure its bitcoin. < The Custodian will maintain insurance with regard to its custodial < business on such terms and conditions as it considers appropriate in < connection with its custodial obligations and will be responsible < for all costs, fees and expenses arising from the insurance policy < or policies. > The Trust does not currently intend to insure its bitcoin. > The Custodian does, however, maintain insurance in the form of a > fidelity bond with regard to its custodial business on such terms > and conditions as it considers appropriate in connection with its > custodial obligations and will be responsible for all costs, fees > and expenses arising from the insurance policy or policies. > The Custodian's statutorily required fidelity bond coverage includes, > among other things, insurance against employee theft, computer fraud, > and funds transfer fraud; this coverage is subject to certain terms, > conditions, and exclusions. > This fidelity bond has been in effect since > > 30 > > Table of Contents > > October 1, 2015. --- 2839c3013 ----------------------- < and Sponsor under [New York] law governing their custody operations > and Sponsor under New York law governing their custody operations --- 2841,2844c3015,3016 ----------------------- < Similarly, Shareholders' recourse against the Administrator and Trust < Agency Service Provider for the services they provide to the Trust, < including those relating to the provision of instructions relating < to the movement of bitcoin, is limited. > Similarly, Shareholders' recourse against the Administrator and > Transfer Agent for the services they provide to the Trust is limited. --- 2847c3019 ----------------------- < person is liable in damages. > person is contractually liable in damages. --- 2859c3031 ----------------------- < Risks of Uninsured Losses. > No Insurance. --- 2861,2868c3033,3042 ----------------------- < It may not be possible, either because of a lack of available policies < or because of prohibitive cost, for the Trust to obtain insurance of < any type that would cover losses associated with bitcoin. < In general, the Trust anticipates that any losses related to its < activities and operations will be uninsurable, or the cost of insuring < against these losses may not be economically justifiable. < If an uninsured loss occurs or a loss exceeds policy limits, the < Trust could lose all of its assets. > The Trust does not currently intend to attempt to insure its bitcoin, > but it may elect to do so upon the establishment of a viable insurance > market for bitcoin. > Because of a lack of available coverage and the prohibitive cost of > coverage, it is not practicable for the Trust to obtain insurance of > any type that would cover losses associated with bitcoin at this time. > The Sponsor will endeavor to stay apprised of developments in the > insurance market and will evaluate any such insurance plans which may > insure the assets of the Trust with economically practicable terms > and rates. --- 2873c3047,3048 ----------------------- < to the market value of the bitcoin at the time the fraud is discovered. > to the market value of the bitcoin lost or damaged at the time the > fraud is discovered. --- 2877,2878c3052,3054 ----------------------- < are the direct result of its own gross negligence, willful misconduct < or bad faith in the performance of its administrative custodial duties. > are the direct result of its own fraud, gross negligence, willful > misconduct or bad faith in the performance of its administrative > custodial duties. --- 2880,2882c3056,3058 ----------------------- < bitcoin held in the Trust Custody Account at the time such gross < negligence, bad faith or willful misconduct is discovered by the < Administrator or Sponsor on behalf of the Trust. > bitcoin lost or damaged at the time such fraud, gross negligence, > bad faith or willful misconduct is discovered by the Sponsor on behalf > of the Trust. --- 2886,2887c3062,3063 ----------------------- < under the Trust Agreement by reason of any cause beyond its reasonable < control, including acts of God, war or terrorism. > under the Trust Custody Agreement by reason of any cause beyond its > reasonable control, including acts of God, war or terrorism. --- 2889,2893c3065,3070 ----------------------- < third-party penetration of the Cold Storage System, unless such system < failure or third-party penetration is the result of gross negligence, < bad faith or willful misconduct on the part of the Custodian. < As a result, the recourse of the Trust or the investor, under [New < York] law, is limited. > third-party penetration of the Cold Storage System, unless such > system failure or third-party penetration is the result of fraud, > gross negligence, bad faith or willful misconduct on the part of > the Custodian. > As a result, the recourse of the Trust or any investor in the Trust, > under New York law, is limited. --- 2895c3072 ----------------------- < Risks Relating to Reliance on Third Party Service Providers. > Risks relating to reliance on third party service providers. --- 2904,2907d3080 ----------------------- < 29 < < Table of Contents < --- 2917a3091,3095 ----------------------- > > 31 > > Table of Contents > --- 2938,2941c3116,3119 ----------------------- < significant portion of the Shares' daily trading volume on Bats < withdraw from participation, the liquidity of the Shares will likely < decrease, which could adversely affect the market price of the Shares < and adversely affect an investment in the Shares. > significant portion of the Shares' daily trading volume withdraw from > participation, the liquidity of the Shares will likely decrease, > which could adversely affect the market price of the Shares and > adversely affect an investment in the Shares. --- 2946,2949c3124,3126 ----------------------- < To the extent that no active trading market develops on Bats and the < assets of the Trust do not reach a viable size, the liquidity of the < Shares may be limited or the Trust may be terminated at the option < of the Sponsor. > To the extent that no active trading market develops and the assets of > the Trust do not reach a viable size, the liquidity of the Shares may > be limited or the Trust may be terminated at the option of the Sponsor. --- 2958,2967c3135 ----------------------- < will develop and that the Shares will be liquid on Bats. < A reduction in the liquidity of the Shares on Bats could adversely < affect an investment in the Shares. < < The lack of a market for the Shares may limit the ability of < Shareholders to sell the Shares. < < There has been no market for the Shares, and there can be no assurance < that an active trading market for the Shares will be developed or < maintained. > will be developed or maintained and that the Shares will be liquid. --- 2970a3139,3140 ----------------------- > A reduction in the liquidity of the Shares could adversely affect an > investment in the Shares. --- 2984,2985c3154,3156 ----------------------- < Shareholders, such as when the Gemini Exchange Spot Price is lower < than it was at the time when Shareholders purchased their Shares. > Shareholders, such as when > the Gemini Exchange Auction Price is lower than it was at the time > when Shareholders purchased their Shares. --- 2989,2990c3160,3161 ----------------------- < will be less than if the Gemini Exchange Spot Price were higher at < the time of sale. > will be less than if > the Gemini Exchange Auction Price were higher at the time of sale. --- 2997,3000d3167 ----------------------- < 30 < < Table of Contents < --- 3004,3010c3171,3173 ----------------------- < As interests in an investment trust, the Shares have none of the < statutory rights normally associated with the ownership of shares of < a corporation (including, for example, the right to bring "oppression" < or "derivative" actions). < In addition, the Shares have limited voting and distribution rights < (for example, Shareholders do not have the right to elect directors < and will not receive dividends). > The Shares have limited voting and distribution rights (for example, > Shareholders do not have the right to elect directors and will not > receive dividends). --- 3029,3035c3192,3203 ----------------------- < Each of the Sponsor and the Custodian are responsible for taking < such steps as it determines, in its sole judgment, to be required < to maintain and upgrade the Cold Storage System to protect against < failure, hacking, malware and general security threats. Neither the < Sponsor nor the Custodian is liable to the Trust or to Shareholders < for the failure or penetration of the Cold Storage System absent gross < negligence, willful misconduct or bad faith on the part of such party. > 32 > > Table of Contents > > The Custodian is responsible for taking such steps as it determines, > in its sole judgment, to be required to establish, maintain and > periodically upgrade the Cold Storage System to ensure the security > of the > Trust's bitcoin. Neither the Sponsor nor the Custodian is liable to > the Trust or to Shareholders for the failure or penetration of the > Cold Storage System absent fraud, gross negligence, willful misconduct > or bad faith on the part of such party. --- 3043,3045c3211,3215 ----------------------- < The Administrator is solely responsible for determining the price of < bitcoin, and any errors, discontinuance or changes in such valuation < calculations may have an adverse effect on the value of the Shares. > The Sponsor is solely responsible for selecting the method of > determining the price of the > Trust's bitcoin, and any errors, discontinuance or changes in such > valuation calculations by the Administrator may have an adverse effect > on the value of the Shares. --- 3048,3049c3218,3220 ----------------------- < as measured at 4:00 p.m. Eastern time using the Gemini Exchange Spot < Price on each Business Day. > as measured using > the Gemini Exchange Auction Price on each Business Day, as provided > to the Administrator by the Sponsor. --- 3063,3064c3234,3235 ----------------------- < expenses that are not assumed by the Sponsor under the terms of the < Trust Agreement are borne by the Trust and paid through the sale of the > expenses that are not assumed by the Sponsor are borne by the Trust > and paid through the sale of the --- 3084,3087d3254 ----------------------- < 31 < < Table of Contents < --- 3092,3095c3259,3262 ----------------------- < The Administrator will transfer bitcoin held by the Trust to the Trust < Expense Account to pay Trust expenses not assumed by the Sponsor on < an as-needed basis, irrespective of then-current bitcoin prices on < the Bitcoin Exchange Market. > The Administrator will instruct the Custodian to transfer bitcoin > held by the Trust to the Trust Expense Account to pay Trust expenses > not assumed by the Sponsor on an as-needed basis, irrespective of > then-current bitcoin prices on the Bitcoin Exchange Market. --- 3105,3116c3272,3285 ----------------------- < required to indemnify the Sponsor, the Trustee, the Administrator, < the Trust Agency Service Provider or the Custodian under the Trust < Documents. < < Under the Trust Documents, each of the Sponsor, the Trustee, the < Administrator, the Trust Agency Service Provider and the Custodian has < a right to be indemnified by the Trust for any liability or expense < it incurs without gross negligence, bad faith or willful misconduct on < its part. Therefore, the Sponsor, Trustee, Administrator, Trust Agency < Service Provider or Custodian may require that the assets of the Trust < be sold in order to cover losses or liability suffered by it. Any sale < of that kind would reduce the net asset value of the Trust and the NAV. > required to indemnify the Trustee, the Administrator, the Transfer > Agent or the Custodian under the Trust Documents. > > Under the Trust Documents, each of the Trustee, the Administrator, > the Transfer Agent and the Custodian has a right to be indemnified by > the Trust for any liability or expense it incurs, subject to certain > exceptions. Therefore, the Trustee, Administrator, Transfer Agent, > or Custodian may require that the assets of the Trust be sold in > order to cover losses or liability suffered by it. Any sale of that > kind would reduce the net assets of the Trust and the NAV. > > 33 > > Table of Contents --- 3131,3132c3300,3301 ----------------------- < the Trust from operating and force the Administrator to terminate < the Trust and liquidate the > the Trust from operating and force the Sponsor to terminate the Trust > and liquidate the --- 3167,3176c3336,3340 ----------------------- < bitcoin have grown in < < 32 < < Table of Contents < < popularity and in market size, the Federal Reserve Board, U.S. Congress < and certain U.S. agencies (e.g., the CFTC, FinCEN and the Federal < Bureau of Investigation) have begun to examine the operations of the < Bitcoin Network, Bitcoin users and the Bitcoin Exchange Market. > bitcoin have grown in popularity and in market size, the Federal > Reserve Board, U.S. Congress and certain U.S. agencies (e.g., the > CFTC, FinCEN and the Federal Bureau of Investigation) have begun to > examine the operations of the Bitcoin Network, Bitcoin users and the > Bitcoin Exchange Market. --- 3180,3195c3344,3349 ----------------------- < Although the SEC has not opined on the legal characterization < of bitcoin as a security, it has taken various actions against < persons or entities misusing bitcoin in connection with fraudulent < schemes (i.e., Ponzi scheme), inaccurate and inadequate publicly < disseminated information, and the offering of unregistered securities.4 < Commissioners of the CFTC initially expressed the belief that bitcoin < meet the definition of a commodity and that the CFTC has regulatory < authority over futures and other derivatives based on Digital Assets, < subject to facts and circumstances. < The Sponsor also espoused the view that, on balance, the important < features of bitcoin and other Digital Assets are those that are < characteristics of commodities and therefore has referred to and < discussed these assets as such. Additional clarity was obtained < on September 17, 2015, when the CFTC instituted and settled the < Coinflip case. < The Coinflip order found that the respondents > Although the SEC has not opined on the legal characterization of > bitcoin as a security, it has taken various actions against persons > or entities misusing bitcoin in connection with fraudulent schemes > (i.e., Ponzi scheme), inaccurate and inadequate publicly disseminated > information, and the offering of unregistered securities.13 As noted > above, the CFTC in the Coinflip order found that the respondents --- 3211,3213c3365,3376 ----------------------- < representation of value that functions as a medium of exchange, < a unit of account, and/or a store of value, but does not have legal < tender status in any jurisdiction > representation of value that functions as a medium of exchange, a unit > of account, and/or a store of value, but does not have legal tender > > 13 > > See supra note 3. > > 34 > > Table of Contents > > status in any jurisdiction --- 3234c3397 ----------------------- < or financed basis" without first registering with the CFTC.5 > or financed basis" without first registering with the CFTC.14 --- 3253,3264c3416,3417 ----------------------- < trust company, the Custodian operates under the < < 4 See, supra note 3. < 5 < See In re BFXNA Inc., No. 16-19 (CFTC June 2, 2016), available at: < http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/legalpleading/enfbfxnaorder060216.pdf. < < 33 < < Table of Contents < < direct supervision and regulatory authority of the NYSDFS. > trust company, the Custodian operates under the direct supervision > and regulatory authority of the NYSDFS. --- 3274,3276c3427,3434 ----------------------- < form of money," two CFTC commissioners publicly expressed a belief < that derivatives based on bitcoin are subject to the same regulation < as those based on commodities, and the IRS released guidance treating > form of money," > a Florida circuit court judge determined that bitcoin did not qualify > as money or "tangible wealth," and an opinion from the U.S. District > Court for the Northern District of Illinois identified Bitcoin as > "virtual currency." > Additionally, two CFTC commissioners publicly expressed a belief that > derivatives based on bitcoin are subject to the same regulation as > those based on commodities, and the IRS released guidance treating --- 3286c3444 ----------------------- < licensing regime for businesses engaging in "virtual currencies". In > licensing regime for businesses engaging in "virtual currencies." In --- 3289,3292c3447,3451 ----------------------- < consideration by the California State Assembly. There is a possibility < of future regulatory change altering, perhaps to a material extent, < the nature of an investment in the Shares or the ability of the Trust < to continue to operate. > consideration by the California State Assembly. As of August 2016, > the bill was withdrawn from consideration for vote for the remainder > of the year.15 There is a possibility of future regulatory change > altering, perhaps to a material extent, the nature of an investment > in the Shares or the ability of the Trust to continue to operate. --- 3298,3302c3457,3473 ----------------------- < Furthermore, regulatory actions may limit the ability of end-users < to convert bitcoin into fiat currency (e.g., U.S. Dollars) or use < bitcoin to pay for goods and services. Such regulatory actions or < policies would result in a reduction of the Gemini Exchange Spot < Price and the price of the Shares. > Furthermore, regulatory actions may limit the ability of > > 14 > See In re BFXNA Inc., Case No. 16-19 (CFTC June 2, 2016). > 15 > > California Assemblymember Matt Dababneh, Statement on the Regulation > of Virtual Currency (Aug. 15, 2016). > > 35 > > Table of Contents > > end-users to convert bitcoin into fiat currency (e.g., U.S. Dollars) > or use bitcoin to pay for goods and services. Such regulatory actions > or policies would result in a reduction of > the Gemini Exchange Auction Price and the price of the Shares. --- 3307,3335c3478,3530 ----------------------- < Germany-where the Ministry of Finance has declared bitcoin to be < "Rechnungseinheiten" (a form of private money that is recognized < as a unit of account, but not recognized in the same manner as < fiat currency)-have issued guidance as to how to treat bitcoin, < most regulatory bodies have not yet issued official statements < regarding intention to regulate or determinations on regulation of < bitcoin, the Bitcoin Network and Bitcoin users. Among those for < which preliminary guidance has been issued in some form, Canada < and Taiwan have labeled bitcoin as a digital or virtual currency, < distinct from fiat currency, while Sweden and Norway are among those < to categorize bitcoin as a form of virtual asset or commodity. In < China, a recent government notice classified bitcoin as legal and < "virtual commodities;" however, the same notice restricted the banking < and payment industries from using bitcoin, creating uncertainty and < limiting the ability of Bitcoin Exchanges to operate in the then-second < largest bitcoin market. Since December 2013, China, Iceland, Vietnam < and Russia have taken a more restrictive stance toward bitcoin and, < thereby, have reduced the rate of expansion of Bitcoin use in each < country. In May 2014, the Central Bank of Bolivia banned the use < of bitcoin as a means of payment. In the summer and fall of 2014, < Ecuador announced plans for its own state-backed electronic money, < while passing legislation that prohibits the use of decentralized < Digital Assets such as bitcoin. In January 2016, the People's Bank < of China, China's central bank, disclosed that it has been studying < a state-backed electronic monetary system and potentially had plans < for its own state-backed electronic money. In April 2016, it was < reported that the Russian Finance Ministry is considering proposing < regulations that would prohibit the issuance of all Digital Assets < or their use in exchange for goods or services in Russia. > Germany, where the Ministry of Finance has declared bitcoin to be > "Rechnungseinheiten" (a form of private money that is recognized as > a unit of account, but not recognized in the same manner as fiat > currency), have issued guidance as to how to treat bitcoin, most > regulatory bodies have not yet issued official statements regarding > intention to regulate or determinations on regulation of bitcoin, > the Bitcoin Network and Bitcoin users. > > Among those for which preliminary guidance has been issued in some > form, Canada and Taiwan have labeled bitcoin as a digital or virtual > currency, distinct from fiat currency, while Sweden and Norway are > among those to categorize bitcoin as a form of virtual asset or > commodity. In Australia, a GST (similar to the European value added > tax ("VAT")) is currently applied to Bitcoin, forcing a ten (10) > percent markup on top of market price, essentially preventing the > operation of any Bitcoin exchange. > This may be undergoing a change, however, since the Senate Economics > References Committee and the Productivity Commission recommended that > digital currency be treated as money for GST purposes to remove the > double taxation. The United Kingdom determined that the VAT will not > apply to Bitcoin sales. In China, a recent government notice classified > bitcoin as legal and "virtual commodities;" however, the same notice > restricted the banking and payment industries from using bitcoin, > creating uncertainty and limiting the ability of Bitcoin Exchanges to > operate in the then-second largest bitcoin market. In January 2016, > the People's Bank of China, China's central bank, disclosed that > it has been studying a state-backed electronic monetary system and > potentially had plans for its own state-backed electronic money. In > January 2017, the People's Bank of China announced that it had found > several violations, including margin financing and a failure to impose > anti-money laundering controls, after on-site inspections of two > China-based Bitcoin Exchanges. In response to the Chinese regulator's > oversight, the three largest China-based Bitcoin Exchanges, OKCoin, > Huobi, and BTC China, started charging trading commission fees to > suppress speculative trading and prevent price swings which resulted > in a significant drop in volume on these exchanges. Since December > 2013, China, Iceland, Vietnam and Russia have taken a more restrictive > stance toward bitcoin and, thereby, have reduced the rate of expansion > of Bitcoin use in each country. In May 2014, the Central Bank of > Bolivia banned the use of bitcoin as a means of payment. In the summer > and fall of 2014, Ecuador announced plans for its own state-backed > electronic money, while passing legislation that prohibits the use of > decentralized Digital Assets such as bitcoin. In July 2016, economists > at the Bank of England advocated that central banks issue their own > digital currency, and the House of Lords and Bank of England started > discussing the feasibility of creating a national virtual currency, > the BritCoin. As of July 2016, Iceland was studying how to create a > system in which all money is created by a central bank, and Canada was > beginning to experiment with a digital version of its currency called > CAD-COIN, intended to be used exclusively for interbank payments. In > July 2016, the Russian Ministry of Finance indicated it supports a > proposed law that bans bitcoin domestically but allows for its use > as a foreign currency. --- 3346,3349c3541,3555 ----------------------- < are expected to be effective beginning in 2017. Various foreign < jurisdictions may, in the near future, adopt laws, regulations or < directives that affect the Bitcoin Network and its users, particularly < Bitcoin Exchanges > are expected to be effective beginning in 2017. In July 2016, the > European Commission released a draft directive that proposed applying > counter-terrorism and anti-money laundering regulations to virtual > currencies, and, in September 2016, the > European Banking authority advised the European Commission to institute > new regulation specific to virtual currencies, with amendments to > existing regulation as a stopgap measure. Various foreign jurisdictions > may, in the near future, adopt laws, regulations or directives > that affect the Bitcoin Network and its users, particularly Bitcoin > Exchanges and service providers that fall within such jurisdictions' > regulatory scope. Such laws, regulations or directives may conflict > with those of the United States and may negatively impact the > acceptance of bitcoin by users, merchants and service providers > outside of the United States and may therefore impede the growth of > the Bitcoin economy. --- 3351c3557 ----------------------- < 34 > 36 --- 3355,3360d3560 ----------------------- < and service providers that fall within such jurisdictions' regulatory < scope. Such laws, regulations or directives may conflict with those of < the United States and may negatively impact the acceptance of bitcoin < by users, merchants and service providers outside of the United States < and may therefore impede the growth of the Bitcoin economy. < --- 3370c3570 ----------------------- < Although currently bitcoin is not regulated or are lightly regulated > Although currently bitcoin is not regulated or is lightly regulated --- 3415,3421c3615,3630 ----------------------- < "virtual currency" regulation and additional state regulators including < those from California, Idaho, Virginia and Washington have made public < statements indicating that virtual currency businesses may be required < to seek licenses as money transmitters. In numerous other states, < including Connecticut, North Carolina, New Hampshire and New Jersey, < legislation is being proposed or has been introduced regarding the < treatment of bitcoin and other Digital Assets. > "virtual currency" regulation and additional state regulators > including those from California, Idaho, Virginia, Kansas, Texas, > South Dakota and Washington have made public statements indicating > that virtual currency businesses may be required to seek licenses as > money transmitters. In July 2016, North Carolina updated the law to > define "virtual currency" and the activities that trigger licensure > in a business friendly approach that encourages companies to use > virtual currency and blockchain technology. Specifically, the North > Carolina law does not require miners or software providers to obtain a > license for multi-signature software, smart contract platforms, smart > property, colored coins and non-hosted, non-custodial wallets. Starting > January 1, 2016, New Hampshire requires anyone exchanges a digital > currency for another currency must become a licensed and bonded money > transmitter. In numerous other states, including Connecticut and New > Jersey, legislation is being proposed or has been introduced regarding > the treatment of bitcoin and other Digital Assets. --- 3434c3643,3645 ----------------------- < Any such > Any such termination could result in the liquidation of the > Trust's bitcoin at a time that is disadvantageous to an investor in > the Shares. --- 3436c3647 ----------------------- < 35 > 37 --- 3440,3443d3650 ----------------------- < termination could result in the liquidation of the < Trust's bitcoin at a time that is disadvantageous to an investor in < the Shares. < --- 3525,3526c3732,3737 ----------------------- < NYSDTF, for example, has issued guidance regarding the application < of state tax law to > New York State Department of Taxation and Finance ("NYSDTF"), for > example, has issued guidance regarding the application of state tax > law to Digital Assets such as bitcoin. The agency determined that New > York State would follow IRS guidance with respect to the treatment > of Digital Assets such as bitcoin for state income tax purposes. > Furthermore, the NYSDTF concluded that Digital Assets such as bitcoin --- 3528c3739 ----------------------- < 36 > 38 --- 3532,3535d3742 ----------------------- < Digital Assets such as bitcoin. The agency determined that New York < State would follow IRS guidance with respect to the treatment of < Digital Assets such as bitcoin for state income tax purposes. < Furthermore, the NYSDTF concluded that Digital Assets such as bitcoin --- 3581a3789,3798 ----------------------- > o The > Trust's bitcoin is valued, and the > Trust's NAV is calculated, using > the Gemini Exchange Auction Price, and > the Gemini Exchange Auction Price, as provided by the Sponsor in the > same manner as it is provided in connection with the daily calculation > of the > Trust's NAV, will be used by the Administrator to calculate the amount > of the Sponsor's Fee due to the Sponsor; > --- 3583,3584c3800,3805 ----------------------- < The Trust has agreed to indemnify the Sponsor and its affiliates < pursuant to the terms of the Trust Agreement; > The Sponsor's relationship with the Gemini Exchange creates an > incentive for the Sponsor to sell the bitcoin it collects as its > Sponsor's Fee for U.S. dollars on the Gemini Exchange, which benefits > the Sponsor's affiliates through increased volume on the Gemini > Exchange and which may negatively impact the value of the > Trust's remaining bitcoin; --- 3586,3589c3807,3811 ----------------------- < o The < Trust's bitcoin is valued using Gemini Exchange Spot Price, and the < Gemini Exchange Spot Price will be used to calculate the amount of < the Sponsor Fee due to the Sponsor; > o > The Sponsor's employees may also service affiliates of the Sponsor, > including the Custodian and the Gemini Exchange, and their respective > clients and cannot devote all of its, or their, respective time or > resources to the management of the business and affairs of the Trust; --- 3592,3594c3814,3819 ----------------------- < The Sponsor, its affiliates and their officers and employees are not < prohibited from engaging in other businesses or activities, including < those that might be in direct competition with the Trust; and > The Sponsor, its affiliates and their officers and employees may > own and trade bitcoin and are not prohibited from engaging in other > businesses or activities, including those that might be in direct > competition with the Trust, and such records of holdings, trading, > and other businesses or activities will not be available for inspection > by Shareholders; and --- 3602,3605c3827,3838 ----------------------- < Trust's NAV and determine the amount of the Sponsor's Fee, it may < not be possible to entirely eliminate these conflicts of interest. By < investing in the Shares, investors agree and consent to the provisions < set forth in the Trust Agreement. > Trust's NAV and determine the amount of the Sponsor's Fee (based on > the publicly-available Gemini Exchange Auction Price, which will be > provided to the Administrator by the Sponsor in the same manner > > 39 > > Table of Contents > > as it is provided in connection with the daily calculation of the > Trust's NAV), it may not be possible to entirely eliminate these > conflicts of interest. By investing in the Shares, investors agree > and consent to the provisions set forth in the Trust Agreement. --- 3616,3622c3849 ----------------------- < to the interests of < < 37 < < Table of Contents < < the Trust or its Shareholders. Affiliates of > to the interests of the Trust or its Shareholders. Affiliates of --- 3624c3851,3852 ----------------------- < to bitcoin through investment in the Shares. > to bitcoin through investment in the Shares; however, no affiliate of > the Sponsor will act as an Authorized Participant. --- 3631,3636c3859,3901 ----------------------- < an impact on the Gemini Exchange Spot Price. The initiation of, < or material increases in, a substantial investment in bitcoin may < result in an increase in the Gemini Exchange Spot Price. A material < reduction in a substantial investment may result in a decrease in the < Gemini Exchange Spot Price, having a negative impact on the value of < the Shares. > an impact on > the Gemini Exchange Auction Price. The initiation of, or material > increases in, a substantial investment in bitcoin may result in an > increase in > the Gemini Exchange Auction Price. Affiliates of > the Sponsor may participate in the daily 4:00 p.m. auction on the > Gemini Exchange. > In addition, > the Sponsor will periodically liquidate its bitcoin in the daily 4:00 > p.m. auction on the Gemini Exchange in order to obtain U.S. dollars > necessary to pay expenses related to the Trust. > To the extent the participation by the Sponsor or its affiliates > impacts > the Gemini Exchange Auction Price, the NAV determined using > the Gemini Exchange Auction Price will be similarly impacted. If the > Sponsor or its affiliates liquidate bitcoin holdings during the 4:00 > p.m. auction on the Gemini Exchange, > the Gemini Exchange Auction Price for that day may be lower and the > NAV of the Shares may decline. > Conversely, if the Sponsor or its affiliates purchase bitcoin during > the 4:00 p.m. auction on the Gemini Exchange, > the Gemini Exchange Auction Price for that day may be higher and the > NAV of the Shares may increase. Any increase in > the Gemini Exchange Auction Price would affect the NAV of the Trust > and increase the Sponsor's Fee, potentially causing a conflict of > interest between the Sponsor and its affiliates and the > Trust's shareholders. Any decrease in > the Gemini Exchange Auction Price would affect the NAV of the Trust > by decreasing the value of the Shares, potentially causing a conflict > of interest between the Sponsor and its affiliates and the > Trust's shareholders to the extent that the Sponsor or its affiliates > purchase Shares of the Trust at a lower NAV. > > A material reduction in a substantial investment in bitcoin may result > in a decrease in > the Gemini Exchange Auction Price, having a negative impact on the > value of the Shares. While no affiliate of the Sponsor is an Authorized > Participant, it is possible that an affiliate of the Sponsor could > enter into transactions to purchase from or sell or lend bitcoin to > an Authorized Participant. > Any such transactions would occur at the current market price of > bitcoin in the Bitcoin Exchange Market and may result in realization > of significant gains to the affiliate. --- 3644,3659c3909,3911 ----------------------- < its activities on behalf of the Trust and a substitute sponsor has < not been appointed, the Administrator would terminate the Trust and < liquidate the bitcoin held by the Trust. < < Appointment of a substitute sponsor will not guarantee the < Trust's continued operation, successful or otherwise. Because a < substitute sponsor may have no experience managing a Digital Asset < ETP, a substitute sponsor may not have the experience, knowledge or < expertise required to ensure that the Trust will operate successfully < or to continue to operate at all. A substitute sponsor may not be < capable of receiving an assignment of the lease and license of the < Custodian's Cold Storage System for reasons including its lack of < expertise regarding the necessary maintenance or upgrading of such < system. Therefore, the appointment of a substitute sponsor may not < necessarily be beneficial to the Trust or an investment in the Shares < and the Administrator may determine to terminate the Trust. > its activities on behalf of the Trust, the Trustee will terminate > the Trust and instruct the Custodian or other party to liquidate the > bitcoin held by the Trust. --- 3665,3671c3917,3926 ----------------------- < regarding the formation and operation of the Trust. No counsel has been < appointed to represent an investor in connection with the offering < of the Shares. Accordingly, an investor should consult his, her, or < its own legal, tax and financial advisers regarding the desirability < of an investment in the Shares. Lack of such consultation may lead < to an undesirable investment decision with respect to investment in < the Shares. > regarding the formation and operation of the Trust. No counsel has > been appointed to represent an investor in connection with the offering > of the Shares. Accordingly, investors should consult their own legal, > tax and financial advisers regarding the desirability of an investment > in the Shares. Lack of such consultation may lead to an undesirable > investment decision with respect to investment in the Shares. > > 40 > > Table of Contents --- 3676,3679c3931,3933 ----------------------- < Under the Trust Agreement, Shareholders have no voting rights and < the Trust will not have regular Shareholder meetings. Shareholders < only vote on such matters and at such times as determined by the < Sponsor. Accordingly, Shareholders do not have the right to authorize > Under the Trust Agreement, Shareholders have no voting rights except in > limited circumstances and the Trust will not have regular Shareholder > meetings. Accordingly, Shareholders do not have the right to authorize --- 3689c3943 ----------------------- < 38 > 41 --- 3695,3699c3949,3953 ----------------------- < Deposits delivered to the Trust in connection with the creation of < Baskets, including the Seed Baskets, will consist only of bitcoin. < Pursuant to the Trust Agreement, during the life of the Trust such < delivery of bitcoin will only be < (i) held by the Trust, > Deposits delivered to the Trust in connection with the creation > of Baskets, including the Seed Baskets, will consist only of > bitcoin. During the life of the Trust such delivery of bitcoin will > only be > (i) held by the Trust; --- 3701,3703c3955,3960 ----------------------- < redemption of Baskets, or < (iii) disbursed to pay the Sponsor's Fee or sold as needed to pay the < Trust's expenses not assumed by the Sponsor. > redemption of Baskets; > (iii) transferred to pay the Sponsor's Fee; > (iv) transferred and sold as needed to pay the > Trust's expenses not assumed by the Sponsor; or > (v) sold in connection with the termination and liquidation of the > Trust or as otherwise required by law or regulation. --- 3723c3980 ----------------------- < known as the "Blockchain," which is a digital file stored in a > known as the "Blockchain," which is a digital record stored in a --- 3741c3998 ----------------------- < The Blockchain is comprised of a digital file, downloaded and > The Blockchain is comprised of a digital record, downloaded and --- 3773c4030 ----------------------- < 39 > 42 --- 3859c4116 ----------------------- < 40 > 43 --- 3907,3920c4164,4178 ----------------------- < spending party must enter the address into its Bitcoin Network software < program along with the number of bitcoin to be sent. The number of < bitcoin to be sent will typically be agreed upon between the two < parties based on a set number of bitcoin or an agreed upon conversion < of the value of fiat currency to bitcoin. Most Bitcoin Network software < programs also allow, and often suggest, the payment of a transaction < fee (also known as a miner's fee). Transaction fees are not required < to be included by many Bitcoin Network software programs, but, when < they are included, they are paid by the spending party on top of the < specified amount of bitcoin being sent in the transaction. Transaction < fees, if any, are typically a fractional number of bitcoin (e.g., < 0.005 or 0.0005 bitcoin) and are automatically transferred by the < Bitcoin Network to the Bitcoin Network miner that solves and adds < the block recording the spending transaction on the Blockchain. > spending party must enter the address into its Bitcoin Network > software program along with the number of bitcoin to be sent. The > number of bitcoin to be sent will typically be agreed upon between > the two parties based on a set number of bitcoin or an agreed upon > conversion of the value of fiat currency to bitcoin. Most Bitcoin > Network software programs also allow, and often suggest, the payment > of a transaction fee (also known as a miner's fee). Transaction fees > are not required to be included by many Bitcoin Network software > programs, but, when they are included, they are paid by the > spending party on top of the specified quantity of bitcoin being > sent in the transaction. Transaction fees, if any, are typically > a fractional number of bitcoin (e.g., 0.005 or 0.0005 bitcoin) and > are automatically transferred by the Bitcoin Network to the Bitcoin > Network miner that solves and adds the block recording the spending > transaction on the Blockchain. --- 3928,3930c4186,4188 ----------------------- < (i) the destination public Bitcoin address, < (ii) the number of bitcoin being sent, < (iii) the transaction fees, if any, and > (i) the destination public Bitcoin address; > (ii) the number of bitcoin being sent; > (iii) the transaction fees, if any; and --- 3943c4201 ----------------------- < 41 > 44 --- 3957c4215 ----------------------- < (i) the solution to the block, > (i) the solution to the block; --- 3959c4217 ----------------------- < new block is being added and > new block is being added; and --- 4030c4288 ----------------------- < 42 > 45 --- 4041c4299,4304 ----------------------- < the foreseeable future. > the foreseeable future. Specifically, Bitcoin's choice of various > cryptographic primitives is intended to maintain a 128-bit level of > security across the board for all relevant operations and transaction. > This security level equates to the National Institute for Standards > and Technology ("NIST") recommendation for "Secret." > --- 4043,4054c4306,4326 ----------------------- < ("ECDSA") with the Secp256k1 parameters for digital signatures. ECDSA < has been accredited by the Federal Information Processing Standards < ("FIPS"). The Secp256k1 parameters were chosen by the Standards for < Efficient Cryptography Group, an international industry consortium < that develops commercial standards for efficient elliptic curve < cryptography. < The Bitcoin Network uses both iterated SHA-256 and SHA-256 combined < with RIPEMD-160 as cryptographic hash functions. SHA-256 was designed < by the NSA and is a FIPS-accredited algorithm. RIPEMD-160 was designed < by an academic consortium, and, while not FIPS-accredited, has < withstood twenty (20) years of attacks, and it is also a widely-used < algorithm in the PGP encryption scheme. > ("ECDSA") to authorize the transfer of funds from one bitcoin address > to another. ECDSA is part of the Digital Signature Standard published > by the NIST as a Federal Information Processing Standards Publication > ("FIPS"), number 186.16 The ECDSA domain parameters used by Bitcoin > have the codename "SECP256k1," which is published in the SEC 2 version > 2.0 standard by the Standards for Efficient Cryptography Group > (SECG), an industry consortium that develops commercial standards > for efficient cryptography.17 > > The Bitcoin Network also uses two cryptographic hash functions: > SHA-256 and RIPEMD-160. The SHA-256 function is part of the Secure > Hash Standard published by NIST as FIPS 180.18 The RIPEMD-160 function > was developed in the framework of the European Union Project RIPE;19 > while it is not part of a NIST recommendation, it has withstood > twenty (20) years of attacks, and it is also a widely-used in the > PGP encryption scheme. Hash functions, as a cryptographic primitive, > provide a "one-way function," and are used for assuring the integrity > of transmitted data > . Bitcoin also uses SHA-256 in its proof-of-work system, which ensures > that validating transactions on the Blockchain is computationally > expensive but checking that validity is computationally trivial. --- 4061,4063c4333,4335 ----------------------- < in the Blockchain through the "mining" process, which time-stamps < the transaction and memorializes the change in the ownership of < bitcoin transferred. > in the Blockchain through the "mining" process, which timestamps the > transaction and memorializes the change in the ownership of bitcoin > transferred. --- 4080,4087c4352,4377 ----------------------- < As each block contains a reference to the immediately preceding < block, additional blocks appended to and incorporated into the < Blockchain constitute additional confirmations of the transactions < in such prior blocks, and a transaction included in a block for the < first time is confirmed once against double-spending. The layered < confirmation process makes changing historical blocks (and reversing < transactions) exponentially more difficult the further back one goes < in the Blockchain > As each block contains a reference to the immediately preceding block, > additional blocks appended to and incorporated into the Blockchain > constitute additional > > 16 National Institute for Standards and Technology, Digital Signature > Standard (DSS), Federal Information Processing Standards Publication > 186-4 (July 2013). > 17 Certicom Research, SEC 2: Recommended Elliptic Curve Domain > Parameters, STANDARDS FOR EFFICIENT CRYPTOGRAPHY, Version 2.0 > (Jan. 27, 2010). > 18 National Institute for Standards and Technology, Secure Hash > Standard (SHS), Federal Information Processing Standards Publication > 180-4 (Aug. 2015). > 19 H. Dobbertin, A. Bosselaers, B. Preneel, RIPEMD-160, A Strengthened > Version of RIPEMD, FAST SOFTWARE ENCRYPTION, Lecture Notes in Computer > Science, Vol. 1039 at 71-82 (1996). > > 46 > > Table of Contents > > confirmations of the transactions in such prior blocks, and a > transaction included in a block for the first time is confirmed > once against double-spending. The layered confirmation process makes > changing historical blocks (and reversing transactions) exponentially > more difficult the further back one goes in the Blockchain --- 4103,4127c4393,4405 ----------------------- < solving for and adding new blocks to the Blockchain. Given the size < and speed of the Bitcoin Network, it is generally agreed that the < cost of amassing such computational power exceeds the profit to be < obtained by double-spending or attempting to fabricate prior blocks. < As of May 5, 2016, the Bitcoin Network's estimated aggregate < hashrate exceeded 1,420,991,980 gigahashes per second, according < to Blockchain.info < . BitcoinCharts.com estimated the computational speed of the combined < mining power of the network at approximately 16,649,640 petaFLOPS < (petaFLOPS are a standard measure of computer performance); to provide < context, the world's fastest supercomputer reaches a maximum of 33.86 < petaFLOPS (or less than a hundredth of a percent of the Bitcoin < < 43 < < Table of Contents < < Network's aggregate hashrate). In terms of electricity consumption, < one can estimate the Bitcoin Network's electricity consumption by < multiplying the estimated aggregate hashrate by the most efficient < publicly known ASIC. < As of May 2016, the Bitcoin Network electricity consumption is < estimated to be 85 megawatts, which is approximately equal to the < total power consumption of the top 20 supercomputers with published < power statistics according to Top500.org. > solving for and adding new blocks to the Blockchain. Given the size and > speed of the Bitcoin Network, it is generally agreed that the cost of > amassing such computational power exceeds the profit to be obtained > by double-spending or attempting to fabricate prior blocks. As of > February 1, 2017, the Bitcoin Network's estimated aggregate hashrate > was approximately 2,000,000,000 gigahashes per second, according to > publicly-available information from Blockchain Luxembourg S.A > . BitcoinCharts has estimated the computational speed of the combined > mining power of the network at approximately 26,000,000 petaflops > (petaflops are a standard measure of computer performance); to > provide context, according to Prometeus GmbH, the world's fastest > supercomputer reaches a maximum of 93 petaflops (or about 0.0004% > of the Bitcoin Network's aggregate hashrate). --- 4130,4131c4408,4409 ----------------------- < the total rewards, which was approximately $1.6 million U.S. dollars < per day as of May 1, 2016. > the total rewards, which was approximately $1.8 million U.S. dollars > per day as of February 1, 2017. --- 4176,4179c4454,4462 ----------------------- < through the notation of the new bitcoin creation and their allocation < to the successful miner's public Bitcoin address. To begin mining, < a user can download and run Bitcoin Network mining software, which, < like regular Bitcoin Network software programs, turns the user's > through the notation of the new bitcoin creation and their > > 47 > > Table of Contents > > allocation to the successful miner's public Bitcoin address. To begin > mining, a user can download and run Bitcoin Network mining software, > which, like regular Bitcoin Network software programs, turns the user's --- 4188,4189c4471,4472 ----------------------- < are not memorialized in prior blocks, < (ii) a reference to the most recent prior block, and > are not memorialized in prior blocks; > (ii) a reference to the most recent prior block; and --- 4207,4210d4489 ----------------------- < 44 < < Table of Contents < --- 4238,4243c4517 ----------------------- < network temporarily and marginally declined during December 2014. The < following chart, sourced from Bitcoin.sipa.be, shows the estimated < growth of the Bitcoin Network's computational power from the first < calendar quarter in 2009 to the first calendar quarter in 2016. < < LOGO > network temporarily and marginally declined during December 2014. --- 4251,4256c4525,4526 ----------------------- < been approximately 9.3 minutes for the one hundred and eighty (180) < days prior to and including May 1, 2016. < < 45 < < Table of Contents > been approximately 9 minutes for the one hundred and eighty (180) > days prior to and including February 1, 2017. --- 4261,4283c4531,4556 ----------------------- < difficulty of the target established by the Bitcoin Network, < current miners must invest in expensive mining devices with adequate < processing power to hash at a competitive rate. The first mining < devices were standard home computers; however, mining computers are < currently designed solely for mining purposes. Such devices include < ASICs built by specialized companies such as BitFury. Miners also < incur substantial electricity costs in order to continuously power < and cool their devices while solving for a new block. In June 2013, < blockchain.info estimated that the aggregate electricity costs of < mining across the Bitcoin Network exceeded $300,000 every twenty-four < (24) hours. < Although variables such as the rate and cost of electricity are < estimated, as of September 1, 2013, blockchain.info had revised upward < the average 24-hour electricity cost of all mining on the Bitcoin < Network to more than $1.5 million. In late 2013, blockchain.info ceased < publishing estimated electric consumption on the Bitcoin Network, < in part due to uncertainty in estimating electrical usage as newer, < more energy efficient mining hardware became prevalent. < As of May 2016, over the past year, two (2) years, and three (3) years, < the aggregate hashrate of the Bitcoin Network has increased more than < 3.76-fold, 22.33-fold and 17,730-fold, respectively, due in part to the < development of more energy efficient ASIC mining chips and, during the < second half of 2013, the substantial increase in the price of bitcoin. > difficulty of the target established by the Bitcoin Network, current > miners must invest in expensive mining devices with adequate processing > power to hash at a competitive rate. The first mining devices were > standard home computers; however, mining computers are currently > designed solely for mining purposes. Such devices include ASICs > built by specialized companies such as BitFury. Miners also incur > substantial electricity costs in order to continuously power and cool > their devices while solving for a new block. > Although variables such as the rate and cost of electricity > are estimated, as of September 1, 2013, Blockchain Luxembourg > S.A. estimated that the average > > 48 > > Table of Contents > > 24-hour electricity cost of all mining on the Bitcoin Network to be > more than $1.5 million. In late 2013, Blockchain Luxembourg S.A. ceased > publishing estimated electric consumption of the Bitcoin Network, in > part due to uncertainty in estimating electrical usage as newer, more > energy efficient mining hardware became prevalent. As of February 2017, > over the past year, two (2) years, and three (3) years, the aggregate > hashrate of the Bitcoin Network has increased approximately 3-fold, > 6-fold and 200-fold, respectively, due in part to the development of > more energy efficient ASIC mining chips and, during the second half > of 2013, the substantial increase in the price of bitcoin. --- 4286,4287c4559,4560 ----------------------- < the total rewards, which was approximately $1.6 million U.S. dollars < per day as of May 1, 2016. > the total rewards, which was approximately $1.8 million U.S. dollars > per day as of February 1, 2017. --- 4322,4340c4595,4610 ----------------------- < The Bitcoin Network protocol already includes transaction fee rules and < the mechanics for awarding transaction fees to the miners that solve < for blocks in which the fees are recorded; however, users currently < may opt not to pay transaction fees (depending on the Bitcoin < Network software they use) and miners may choose not to enforce < the transaction fee rules since, at present, the bitcoin rewards < are far more substantial than transaction fees. As of April 2016, < transaction fees accounted for an average of 1.44 percent of miners' < total revenue based upon information available at www.blockchain.info, < though the percentage of revenue represented by transaction fees is < not static and fluctuates based on the number of transactions for < which sending users include transaction fees, the levels of those < transaction fees and the number of transactions a miner includes in < its solved blocks. Typically, transactions do not have difficulty < being recorded if transaction fees are not included. < < 46 < < Table of Contents > The Bitcoin Network protocol already includes transaction fee rules > and the mechanics for awarding transaction fees to the miners > that solve for blocks in which the fees are recorded; however, > users currently may opt not to pay transaction fees (depending on > the Bitcoin Network software they use) and miners may choose not > to enforce the transaction fee rules since, at present, the bitcoin > rewards are far more substantial than transaction fees. As of February > 2017, transaction fees accounted for an average of approximately > five (5) percent of miners' total revenue based upon information > available from Blockchain Luxembourg S.A., though the percentage of > revenue represented by transaction fees is not static and fluctuates > based on the number of transactions for which sending users include > transaction fees, the levels of those transaction fees and the number > of transactions a miner includes in its solved blocks. Typically, > transactions do not have difficulty being recorded if transaction > fees are not included. --- 4352,4362c4622,4638 ----------------------- < According to blockchain.info, as of April 28, 2016, the largest three < (3) known mining pools were AntPool, F2Pool and BTCC Pool, which, < when aggregated, represented approximately sixty-three (63) percent < of the aggregate hashrate of the Bitcoin Network (as calculated by < determining the percentage of blocks mined by each such pool over < the prior four (4) days). Also, according to blockchain.info, on such < date, the nine (9) largest pools (AntPool, F2Pool, BTCC Pool, BitFury, < BW.COM, Slush, BitClub Network, Kano CKPool and KnCMiner) accounted < for approximately ninety-seven (97) percent of the aggregate hashrate < of the Bitcoin Network. In late May and early June 2014, reports < indicated that a mining pool named GHash.io approached and, during > According to Blockchain Luxembourg S.A., as of February 1, 2017, the > largest four (4) known mining pools were AntPool, F2Pool, BitFury and > ViaBTC, which, when aggregated, represented approximately forty-seven > (47) percent of the aggregate hashrate of the Bitcoin Network (as > calculated by determining the percentage > > 49 > > Table of Contents > > of blocks mined by each such pool over the prior four (4) days). Also, > according to information made available by Blockchain Luxembourg > S.A., on such date, the eight (8) largest pools (viz. AntPool, > F2Pool, BitFury, ViaBTC, BTCC Pool, BTC.TOP, BW.COM, and SlushPool) > accounted for approximately seventy-nine (79) percent of the aggregate > hashrate of the Bitcoin Network. In late May and early June 2014, > reports indicated that a single mining pool approached and, during --- 4366,4371c4642,4645 ----------------------- < measuring the percentage of blocks mined by the pool. As of April 28, < 2016, GHash.io's percentage of the aggregate hashrate of the Bitcoin < Network has since fallen to approximately two (2) percent. As of < April 28, 2016, Antpool was determined to be the largest mining pool, < having solved for twenty-eight (28) percent of the block discovered < during the prior four (4) days. > measuring the percentage of blocks mined by the pool. As of February > 1, 2017, that single mining pool has ceased to exist, and Antpool > was determined to be the largest mining pool, having solved for 15.6 > percent of the block discovered during the prior four (4) days. --- 4380,4383c4654,4656 ----------------------- < solving a new block is twenty-five (25) bitcoin per block and the < reward will decrease by half to become twelve and a half (12.5) < bitcoin in or around the start of July 2016 (based on estimates of < the rate of block solution calculated by BitcoinClock.com). > solving a new block is twelve and a half (12.5) bitcoin per block; > the reward decreased from twenty-five (25) bitcoin in July 2016. It > is estimated to halve again in about four years. --- 4389,4393c4662,4670 ----------------------- < See "Modifications to the Bitcoin Protocol," below. As of April 28, < 2016, fifteen million, four hundred and eighty-two thousand, three < hundred (15,482,300) bitcoin have been mined. It is estimated that < more than ninety (90) percent of the twenty-one (21) million bitcoin < will have been produced by 2022. > See "Modifications to the Bitcoin Protocol," below. As of February 1, > 2017, approximately sixteen million, one hundred thousand (16,100,000) > bitcoin have been mined. It is estimated that more than ninety (90) > percent of the twenty-one (21) million bitcoin will have been produced > by 2022. > > The following chart from Blockchain Luxembourg S.A. indicates the > number of bitcoin that have been mined since the Bitcoin Network > began operation in January 2009 through January 2017. --- 4395,4397c4672 ----------------------- < 47 < < Table of Contents > LOGO --- 4399,4401c4674 ----------------------- < The following chart from blockchain.info indicates the number of < bitcoin that have been mined since the Bitcoin Network began operation < in January 2009 through April 2016. > 50 --- 4403c4676 ----------------------- < LOGO > Table of Contents --- 4410c4683 ----------------------- < official developer or group of developers that controls the Bitcoin > designated developer or group of developers who control the Bitcoin --- 4414c4687 ----------------------- < Bitcoin Network source code hosted on GitHub.com, an online service and > Bitcoin Network source code hosted on GitHub, an online service and --- 4417c4690 ----------------------- < code on GitHub.com, but some contributors have an elevated level of > code on GitHub, but some contributors have an elevated level of --- 4439,4447c4712,4720 ----------------------- < is known as a "fork" in the Bitcoin Network. It should be noted that, < although their power to amend the source code is effectively subject < to the approval of users and miners, some contributors have substantial < influence over the development of the Bitcoin Network and the direction < of the Bitcoin community. < < 48 < < Table of Contents > is known as a "hard fork" in the Bitcoin Network. > See "Risk Factors-The acceptance of Bitcoin Network software patches > or upgrades by a significant, but not overwhelming, percentage of the > users and miners in the Bitcoin Network could result in a 'hard fork' > in the Blockchain...." It should be noted that, although their power > to amend the source code is effectively subject to the approval of > users and miners, some contributors have substantial influence over > the development of the Bitcoin Network and the direction of the > Bitcoin community. --- 4483a4757,4761 ----------------------- > > 51 > > Table of Contents > --- 4499,4506c4777,4788 ----------------------- < For example, the daily opening price data for the one hundred (100) < days prior to May 9, 2016 shows that the Bitifinex and BTC-e absolute < price difference was less than 1% percent according to data from < BitcoinWisdom.com. Since 2015, prices on U.S. Dollar-denominated < Bitcoin Exchanges have generally been converging. In January of < 2015, the average range in prices across all Bitcoin Exchanges was < approximately 3.80%; as of May 2016, that figure has dropped to less < than 1.30%.6 > For example, the daily price data for the 180 days prior to February > 1, 2017 shows that the average absolute price difference across > the top eight worldwide U.S. dollar-denominated Bitcoin Exchanges > (viz., Bitfinex, Bitstamp, BTC-e, GDAX, Gemini, itBit, LakeBTC, > and OKCoin) was approximately 1.5%, according to publicly available > data. Over the same period, the U.S-based exchanges (viz., GDAX, > Gemini, and itBit) had an absolute price difference of approximately > 0.6% according to publicly available data. Since 2015, prices on > worldwide U.S. dollar-denominated Bitcoin Exchanges have generally > been converging. In the month of January of 2015, the average range > in prices across all Bitcoin Exchanges was approximately 3.80%; as of > the month of January 2017, that figure has dropped to less than 1.6%. --- 4517,4528c4799,4802 ----------------------- < For example, in the first half of 2013, Mt.Gox accounted for nearly < < 6 See, e.g., https://data.bitcoinity.org/markets/price/2y/USD?c=e&t=l). < < 49 < < Table of Contents < < three-quarters of all Bitcoin Exchange Market trading.7 Any disruption < to Mt.Gox trading, such as a distributed denial of service ("DDOS") < attack had a dramatic impact on the bitcoin price and subsequently < the Bitcoin Exchange Market as a whole. > For example, in the first half of 2013, Mt. Gox accounted for nearly > three-quarters of all Bitcoin Exchange Market trading.20 Any disruption > to Mt. Gox trading, such as a DDoS Attack, had a dramatic impact on the > bitcoin price and subsequently the Bitcoin Exchange Market as a whole. --- 4532c4806,4809 ----------------------- < ecosystem. > ecosystem, though breaches of larger Bitcoin Exchanges, such as the > August 2016 hack of the Bitfinex security system, may still disrupt > the Bitcoin ecosystem and have a significant short-term impact on > bitcoin prices. --- 4543a4821,4843 ----------------------- > 20 For most of 2013, Mt. Gox (a Japanese exchange operated by > Tibanne Co. Ltd.) was the largest online Bitcoin Exchange in the > world. Supporting trading of bitcoin using sixteen (16) different fiat > currencies, Mt. Gox accounted for nearly three-quarters of all Bitcoin > Exchange Market trading during the first half of 2013. On February > 25, 2014, Mt. Gox suspended trading on its platform and, three (3) > days later, filed for bankruptcy protection in Japanese courts, > stating that it had lost approximately 850,000 bitcoin, including > approximately 750,000 bitcoin belonging to its customers. Mt. Gox > subsequently recovered access to approximately 200,000 of the lost > bitcoin. As no full, reliable accounting has been publicly provided, > it is difficult to assess whether Mt. Gox's collapse was due to > cyber-attacks (including denial of service and hacking incidents > reported in 2011 and 2013), mismanagement or fraud, although > many market participants believe Mt. Gox's collapse was due to the > latter. Following the cessation of trading activity on its platform, > Mt. Gox has been in bankruptcy proceedings in Japan and the United > States and is in the process of liquidation. > > 52 > > Table of Contents > --- 4575c4875 ----------------------- < in fact or agent;8 and > in fact or agent21 and --- 4581,4613c4881,4887 ----------------------- < operations subject to the limitations or restrictions as the NYSDFS may < prescribe in its sole discretion. In practice, most limited purpose < trust companies typically engage in activities such as employee < benefit trust, personal trust, corporate trust, transfer < < 7 For most of 2013, Mt. Gox (a Japanese exchange operated at < www.mtgox.com by Tibanne Co. Ltd.) was the largest online Bitcoin < Exchange in the world. Supporting trading of bitcoin using sixteen < (16) different fiat currencies, Mt. Gox accounted for nearly < three-quarters of all Bitcoin Exchange Market trading during the first < half of 2013. On February 25, 2014, Mt. Gox suspended trading on its < platform and, three (3) days later, filed for bankruptcy protection < in Japanese courts, stating that it had lost approximately 850,000 < bitcoin, including approximately 750,000 bitcoin belonging to its < customers. Mt. Gox subsequently recovered access to approximately < 200,000 of the lost bitcoin. As no full, reliable accounting has < been publicly provided, it is difficult to assess whether Mt. Gox's < collapse was due to cyber-attacks (including denial of service and < hacking incidents reported in 2011 and 2013), mismanagement or fraud, < although many market participants believe Mt. Gox's collapse was due < to the latter. Following the cessation of trading activity on its < platform, Mt. Gox has been in bankruptcy proceedings in Japan and < the United States and is in the process of liquidation. < 8 N.Y. Banking Law § 100 (McKinney) < < 50 < < Table of Contents < < agency, securities clearance, investment management, and custodial < services. A trust company, including a limited purpose trust company < like Gemini Trust Company, LLC, can serve as the custodian of customer < funds itself. > operations subject to the limitations or restrictions as the NYSDFS > may prescribe in its sole discretion. In practice, most limited purpose > trust companies typically engage in activities such as employee benefit > trust, personal trust, corporate trust, transfer agency, securities > clearance, investment management, and custodial services. A trust > company, including a limited purpose trust company like Gemini Trust > Company, LLC, can serve as the custodian of customer funds itself. --- 4628,4668c4902,4914 ----------------------- < (i) capital requirements, < (ii) implementation of an anti-money laundering program,9 < (iii) implementation of a cyber security program, and < (iv) consumer protection disclosures.10 < Furthermore, as a limited purpose trust company with fiduciary powers < under the Banking Law, all activities of a trust company, including < all exchange functions, are subject to examination and supervision < by the NYSDFS. Gemini Trust Company, LLC complies with the capital < requirements under New York State banking law, has implemented the < required anti-money laundering program and cybersecurity program and < makes the required consumer protection disclosures. As a facility of a < regulated entity, the Gemini Exchange is obliged to put the interests < of its customers before its own, to provide accurate public market < data and pricing information and to monitor for and prevent market < manipulation. < < As part of its supervision under the NYSDFS and New York Banking Law, < Gemini Trust Company, LLC must < (i) undergo semiannual bank exams, < (ii) submit quarterly financial updates to NYSDFS, < (iii) submit independent third-party year-end audited financial < statements to NYSDFS,11 < (iv) submit semiannual Federal Financial Institutions Examination < Council ("FFIEC") Call Reports12 to the NYSDFS, and < (v) undergo an annual third-party review of its overall security < program as implemented by its Chief Security Officer ("CSO") that may < take the form of a Service Organization Controls ("SOC") Level 2 audit. < < The Gemini Exchange is not the only venue on which Authorized < Participants can purchase bitcoin for delivery to the Trust, but it may < provide a convenient and stable venue given its regulatory oversight < and superior liquidity characteristics. While Authorized Participants < are not obliged to use the Gemini Exchange to trade their bitcoin, < it may prove to be an efficient way to do so. < < 9 In particular, a prospective trust company must establish policies < and procedures designed to ensure and monitor compliance with the < Bank Secrecy Act ("BSA") as amended by the USA PATRIOT Act and the < anti-money laundering programs of Part 115 of the General Regulations < of the Banking Board. A compliance program must include, at a < minimum, a system of internal controls to assure ongoing compliance, > (i) capital requirements; > (ii) implementation of an anti-money laundering program;22 > (iii) implementation of a cyber security program; and > (iv) consumer protection disclosures.23 > Furthermore, as a limited purpose trust company > > 21 N.Y. Banking Law § 100 (McKinney). > 22 In particular, a prospective trust company must establish > policies and procedures designed to ensure and monitor compliance > with the Bank Secrecy Act ("BSA") as amended by the USA PATRIOT Act > and the anti-money laundering programs of Part 115 of the General > Regulations of the Banking Board. A compliance program must include, at > a minimum, a system of internal controls to assure ongoing compliance, --- 4673c4919 ----------------------- < 10 Limited purpose trust companies operating virtual currency exchanges > 23 Limited purpose trust companies operating virtual currency exchanges --- 4680c4926,5010 ----------------------- < 11 Gemini Trust Company, LLC, successfully completed an independent > > 53 > > Table of Contents > > with fiduciary powers under the Banking Law, all activities of > a trust company, including all exchange functions, are subject to > examination and supervision by the NYSDFS. Gemini Trust Company, LLC > complies with the capital requirements under New York State banking > law, has implemented the required anti-money laundering program and > cybersecurity program and makes the required consumer protection > disclosures. As a facility of a regulated entity, the Gemini Exchange > is obliged to put the interests of its customers before its own, > to provide accurate public market data and pricing information and > to monitor for and prevent market manipulation. > > As part of its supervision under the NYSDFS and New York Banking Law, > Gemini Trust Company, LLC must > (i) undergo semiannual bank exams; > (ii) submit quarterly financial updates to NYSDFS; > (iii) submit independent third-party year-end audited financial > statements to NYSDFS;24 > (iv) submit semiannual Federal Financial Institutions Examination > Council ("FFIEC") Call Reports25 to the NYSDFS; and > (v) undergo an annual third-party review of its overall security > program as implemented by its Chief Security Officer ("CSO") that may > take the form of a Service Organization Controls ("SOC") Level 2 audit. > > Gemini Exchange Auction Price > > The Trust values its bitcoin using > the Gemini Exchange Auction Price on each Business Day. The Gemini > Exchange Auction Price is the clearing price of the daily two-sided > auction which occurs at 4:00 p.m. Eastern Time on the Gemini > Exchange. The Gemini Exchange has been conducting these auctions > since September 21, 2016. > These auctions provide an opportunity for both buyers and sellers to > trade in an instant of elevated liquidity and price discovery. The > Gemini Exchange Auction Price is determined by finding the price > which fulfills the greatest aggregate buy demand and sell demand from > all participating, eligible orders (both auction-only and continuous > trading book orders) at the time of the auction. All participating, > eligible orders are filled at the auction price. > This mechanism is similar to the ones used by NYSE Arca, the Nasdaq > Stock Market, Bats, and other large global stock exchanges; it finds > what is called "Walrasian equilibrium." Beginning at 3:50 p.m., > indications of the upcoming auction price are broadcast publicly > in order to give market makers, liquidity providers, and other > participants an opportunity to interact with and to affect > the Gemini Exchange Auction Price; these indicative auction prices > are updated every 60 seconds leading into the auction. Because > indicative auction pricing is published publicly throughout the ten > (10) minutes prior to the auction, this mechanism allows participants > to engage in thorough price discovery while concentrating liquidity > and trading volume at a single moment each day. Information regarding > the auction, including > the Gemini Exchange Auction Price and its volume as well as all > indicative auction events, will be publicly available after each > auction. > However, the Gemini Exchange does not publicly disclose the attributes > of individual auction-only orders at any time. In some circumstances, > an auction may be canceled and a Gemini Exchange Auction Price may > not be published, including a situation wherein > the Gemini Exchange Auction Price were to deviate from the midpoint > of the Gemini Exchange's continuous trading order book by more than > 5%. The Gemini Exchange has no discretion in determining > the Gemini Exchange Auction Price. The Gemini Exchange has mechanisms > to detect price manipulative conduct in connection with the auction, > including, but not limited to, monitoring for the following: > participant self-trading, excessive order placement and cancelation, > and other activity which may be interpreted as "painting the tape." > > The Sponsor believes that > the Gemini Exchange Auction Price is representative of the accurate > price of bitcoin because of the positive price discovery attributes > of the Gemini Exchange marketplace, and because the two-sided auction > process was specifically designed to maximize price discovery and > liquidity, which should > (i) insulate > the Gemini Exchange Auction Price from price swings and volatility, > (ii) minimize the effects of momentum pricing, > (iii) improve the effectiveness of > the arbitrage mechanism for Authorized Participants, and > > 24 Gemini Trust Company, LLC, successfully completed an independent --- 4685c5015 ----------------------- < 12 Gemini Trust Company, LLC, successfully completed and filed its > 25 Gemini Trust Company, LLC, successfully completed and filed its --- 4688c5018 ----------------------- < 51 > 54 --- 4692,4716c5022,5067 ----------------------- < Gemini Exchange Spot Price < < The Trust values its bitcoin as measured at 4:00 p.m. Eastern time < using the Gemini Exchange Spot Price on each Business Day. The Gemini < Exchange Spot Price is the price of bitcoin on the Gemini Exchange < as of 4:00 p.m. Eastern time on each Business Day. < < The Sponsor believes that the Gemini Exchange Spot Price is < representative of the accurate price of bitcoin because of < the positive price discovery attributes of the Gemini Exchange < marketplace. According to market data on bitcoinity.org, as of < May 23, 2016, the Gemini Exchange is a top three (3) U.S.-based < Bitcoin Exchange by volume for the seven (7) days prior and had the < tightest spread as a percentage of price, the tightest spread ten < (10) bitcoin wide on the bid and ask, the tightest spread one hundred < (100) bitcoin wide on the bid and ask and the lowest volatility (i.e., < smallest standard deviation) of any U.S. dollar-denominated bitcoin < order book on any Bitcoin Exchange in the world. < In addition, since opening in October 2015, the Gemini Exchange Spot < Price differed from the median price of all U.S. Dollar-denominated < Bitcoin Exchanges by 0.35% on average; that difference dropped to 0.15% < on average in May 2016.13 < These facts, taken together, suggest that the Gemini Exchange < Spot Price is representative and indicative of the larger Bitcoin < marketplace. > (iv) fairly reflect the value of the > Trust's bitcoin > . Authorized Participants are permitted to, but not obligated to, > participate in the 4:00 p.m. auction on the Gemini Exchange. > > According to publicly available market data for worldwide > U.S. dollar-denominated Bitcoin Exchanges as of February 1, 2017 for > the prior six months: > > o The Gemini Exchange was the eighth-biggest by volume (third-biggest > in the U.S.). > > o The Gemini Exchange had the fourth-tightest bid/ask spread as a > percentage of price (second-tightest in the U.S.). > > o The Gemini Exchange had the third-tightest spread measured ten (10) > bitcoin deep (tightest in the U.S.), and the sixth-tightest spread > measured one hundred (100) bitcoin deep (third-tightest in the U.S.). > > o The Gemini Exchange had the second-lowest volatility (i.e., smallest > standard deviation of daily prices; both worldwide and in the U.S.). > > Since launching on September 21, 2016 and through February 1, 2017, > on Business Days, > the Gemini Exchange Auction Price has deviated from the Gemini > Exchange midpoint price (the midrange of the highest bid and lowest > offer prices) by 0.19% on average and 1.45% at most, and it has > deviated from the median worldwide U.S. dollar-denominated Bitcoin > Exchange price at 4:00 p.m. Eastern Time by 0.27% on average and > 0.91% at most (0.16% on average and 0.74% at most in the U.S.). On > business days between September 21 and February 1, 2017, the volume > has averaged more than 1,200 bitcoin (worth almost $900,000 notional), > representing approximately 4% of all worldwide U.S. dollar-denominated > daily Bitcoin Exchange volume and approximately 15% of all U.S-based > Bitcoin Exchange volume during that period. > Additionally, the Gemini Exchange's auction bolstered its share of the > worldwide U.S. dollar-denominated Bitcoin Exchange Market to almost 7% > (almost 20% in the U.S.) over the same period. > Furthermore, the volume transacted in the Gemini Exchange's auction > is twice the size of the largest single daily transaction (viz., > almost 800 bitcoin or approximately $650,000 on average) on other > worldwide U.S. dollar-denominated Bitcoin Exchanges. > These facts, taken together, suggest that > the Gemini Exchange Auction Price is representative and indicative of > the larger Bitcoin marketplace, and that it can support the liquidity > and volume necessary to maintain an efficient arbitrage mechanism. --- 4724,4729c5075,5081 ----------------------- < The Trust has entered into preliminary conversations with a number < of potential Authorized Participants as well as market makers, each < of which is an experienced participant in the ETP marketplace and < is actively engaged in trading ETPs. A number of these potential < Authorized Participants, currently trade bitcoin and are already < registered participants that trade on the Gemini Exchange > The Trust has entered into preliminary conversations with a number of > potential market makers, and has signed agreements with several > Authorized Participants, each of which is an experienced participant > in the ETP marketplace and is actively engaged in trading ETPs. > These Authorized Participants, as well as a number of market makers, > currently trade bitcoin and are already registered participants that > trade on the Gemini Exchange --- 4737c5089 ----------------------- < characteristics.14 > characteristics. --- 4738a5091,5104 ----------------------- > Additionally, Authorized Participants are permitted to, but not > obligated to, participate in the 4:00 p.m. auction on the Gemini > Exchange. > > To the extent that the Trust, the Sponsor, the Custodian, an Authorized > Participant, or any other affiliated entity will participate in the > two-sided auction which occurs daily at 4:00 p.m. Eastern Time on the > Gemini Exchange, such entity will interact with the auction with the > same standing and access as any other customer of the Custodian and > without any special priority, privilege, or access to information. > > 55 > > Table of Contents --- 4772,4779d5137 ----------------------- < 13 According to market data on bitcoinity.org. < 14 See, e.g., < https://data.bitcoinity.org/markets/exchanges/USD/30d#volatility_asc. < < 52 < < Table of Contents < --- 4797,4801c5155,5159 ----------------------- < was observed, the incident establishes that it is possible that < a substantial mining pool may accumulate close to or more than a < majority of the aggregate hashrate of the Bitcoin Network. As of < April 28, 2016, no single pool controlled more than a third of the < aggregate hashrate of the Bitcoin Network. > was observed, the incident establishes that it is possible that a > substantial mining pool may accumulate close to or more than a majority > of the aggregate hashrate of the Bitcoin Network. As of February 1, > 2017, no single pool controlled more than a sixth of the aggregate > hashrate of the Bitcoin Network. --- 4827,4829c5185,5193 ----------------------- < sufficient speed and accuracy. Users and merchants can dramatically < reduce the risk of a double-spend attack by waiting for multiple < confirmations from the Bitcoin Network before settling a transaction. > sufficient speed and accuracy. Users and merchants can > > 56 > > Table of Contents > > dramatically reduce the risk of a double-spend attack by waiting > for multiple confirmations from the Bitcoin Network before settling > a transaction. --- 4857,4863c5221 ----------------------- < day-traders who invest in bitcoin by trading on Bitcoin Exchanges such < < 53 < < Table of Contents < < as Slovenia-based BitStamp and Hong Kong-based Bitfinex. > day-traders who invest in bitcoin by trading on Bitcoin Exchanges. --- 4880,4882d5237 ----------------------- < Additionally, institutions including Fortress Investment Group < and Pantera Capital made, or proposed to make, direct or indirect < investments in bitcoin or the Bitcoin ecosystem. --- 4896c5251 ----------------------- < whereby the consumer sends bitcoin to BitPay, Coinbase or GoCoin, > whereby the consumer sends bitcoin to BitPay, Coinbase, or GoCoin, --- 4905c5260 ----------------------- < Overstock.com, DISH, Dell, Expedia, Microsoft, and Time, Inc. > Overstock, DISH, Dell, Expedia, Microsoft, and Time, Inc. --- 4910,4920c5265,5276 ----------------------- < including the buying, selling, payment processing and storing of < bitcoin. Bitfinex, Bit-X and BTC-e are three (3) of the largest < global U.S. Dollar-denominated Bitcoin Exchanges in the world based < on Bitcoinity.org as of May 3, 2016. Huobi and OKCoin are large < Bitcoin Exchanges based in China that primarily feature trading < of bitcoin for Chinese Yuan based on Bitcoinity.org as of May 3, < 2016. Coinbase and Circle are each multi-service financial institutions < that provide digital wallets that store bitcoin for users and also < serve as a retail gateway whereby users can purchase bitcoin for < fiat currency. Coinbase, BitPay, BitPagos and GoCoin are examples < of Bitcoin payment processors that allow merchants to accept bitcoin > including the buying, selling, payment processing and storing > of bitcoin. Coinbase and Circle are each multi-service financial > institutions that provide > > 57 > > Table of Contents > > digital wallets that store bitcoin for users and also serve as > a retail gateway whereby users can purchase bitcoin for fiat > currency. Coinbase, BitPay, BitPagos and GoCoin are examples of > Bitcoin payment processors that allow merchants to accept bitcoin --- 4926c5282 ----------------------- < Historical Chart of the Price of Bitcoin, 2012-2016 > Historical Chart of the Price of Bitcoin, 2012-2017 --- 4939,4942d5294 ----------------------- < 54 < < Table of Contents < --- 4949c5301 ----------------------- < May 31, 2016. > February 1, 2017. --- 4952a5305,5324 ----------------------- > The WinkDex represents a blended average price of bitcoin trading > across a number of bitcoin exchanges, and is an indicator of the price > of bitcoin over a historical period. It is calculated by blending > the trading prices in U.S. dollars for the top three (by volume) > qualified Bitcoin Exchanges during the previous two-hour period using > a volume-weighted exponential moving average. > This proprietary formula weights transactions proportionally by > volume as well as exponentially by time to give greater weight both > to higher volume transactions and more recent transactions. WinkDex > tracks each actual trade of bitcoins for U.S. dollars on five qualified > Bitcoin Exchanges. WinkDex's proprietary index dynamically determines > the top three by volume of these exchanges during the prior 24-hour > period. It should not be confused with pricing on the Gemini Exchange, > which has existed only since October 2015, nor > the Gemini Exchange Auction Price. > > 58 > > Table of Contents > --- 4961,4971c5333,5345 ----------------------- < The Trust represents the first known ETP in the United States < that seeks to track the price of a Digital Asset (a "Digital < Asset ETP"). Securitized instruments have been created for other < marketplaces, but have encountered limited success due to their lack < of transparency and thorough regulatory oversight. Two notable examples < are the Grayscale Investment Trust, which trades under the ticker GBTC < on OTC Markets (formerly the "Pink Sheets") and does not qualify as < an exchange-listed product, and Bitcoin Tracker One, which trades < under the ticker COINXBT on the Stockholm Stock Exchange. Neither < of these instruments are held to the same regulatory scrutiny and < oversight as a security listed under the Securities Act. > The Trust represents the first Digital Asset ETP. Securitized > instruments have been created for other marketplaces, but have > encountered limited success due to their lack of transparency > and thorough regulatory oversight. Three notable examples are the > Grayscale Investment Trust, which trades under the ticker GBTC on OTC > Markets (formerly the "Pink Sheets") and does not currently qualify > as an exchange-listed product, Bitcoin Tracker One, which trades > under the ticker COINXBT on the Stockholm Stock Exchange, and the > euro-denominated BitcoinETI Exchange Traded Instrument, which has > been approved for admission to the Gibraltar Stock Exchange and will > be co-listed on Deutsche Boerse. None of these instruments are held > to the same regulatory scrutiny and oversight as a security listed > under the Securities Act. --- 5000,5001c5374,5379 ----------------------- < Online Bitcoin Exchanges traded over $450,000,000 dollars of notional < value during a twenty-four (24) hour period on May 31, 2016.15 > U.S.-based Bitcoin Exchanges traded approximately $40 million of > notional value daily throughout the six months ending February 1, > 2017, compared to a self-reported daily notional trading volume of > almost $1 billion across all worldwide Bitcoin Exchanges. Over that > period, the Gemini Exchange's daily volume has averaged approximately > $2.7 million notional. --- 5004,5008c5382,5405 ----------------------- < account systems, whereby the users of the Bitcoin Exchange send < bitcoin and/or fiat currency to an account of the Bitcoin Exchange, < which records user < < 15 See, e.g., https://data.bitcoinity.org/markets/volume/30d?c=e&t=a > account systems, whereby the users of the Bitcoin Exchange send bitcoin > and/or fiat currency to an account of the Bitcoin Exchange, which > records user sub-account balances in a ledger entry system. Trades > on pooled account exchanges are typically conducted "off-Blockchain," > meaning that they are settled by reallocating bitcoin and money to and > from users on the balanced ledger of the Bitcoin Exchange. Therefore, > a trade on a pooled account exchange will not result in a Bitcoin > transaction being transmitted and subsequently recorded on the > Blockchain, or of a money transfer going from one bank account to > another. For a pooled-account Bitcoin Exchange, Bitcoin transactions > and money transfers typically only occur during the withdrawal > or deposit of bitcoin or fiat currency by an exchange customer, > or if the Bitcoin Exchange needs to shift bitcoin or fiat currency > between its pooled accounts for internal purposes. Nevertheless, > Bitcoin Exchanges typically publish trade data including last price, > bid and ask information, and trade volume, among other data, on their > respective websites and through application programming interfaces > ("APIs"). > > Bitcoin Exchanges Have a History of Security Breaches > > For most of 2013, Mt. Gox (a Japanese Bitcoin Exchange operated by > Tibanne Co. Ltd.) was the largest online Bitcoin Exchange in the > world. Supporting trading of bitcoin using sixteen (16) different fiat --- 5010c5407 ----------------------- < 55 > 59 --- 5014,5038c5411,5416 ----------------------- < sub-account balances in a ledger entry system. Trades on pooled account < exchanges are typically conducted "off-Blockchain," meaning that they < are settled by reallocating bitcoin and money to and from users on < the balanced ledger of the Bitcoin Exchange. Therefore, a trade on a < pooled account exchange will not result in a Bitcoin transaction being < transmitted and subsequently recorded on the Blockchain, or of a money < transfer going from one bank account to another. For a pooled-account < Bitcoin Exchange, Bitcoin transactions and money transfers typically < only occur during the withdrawal or deposit of bitcoin or fiat currency < by an exchange customer, or if the Bitcoin Exchange needs to shift < bitcoin or fiat currency between its pooled accounts for internal < purposes. Nevertheless, Bitcoin Exchanges typically publish trade < data including last price, bid and ask information, and trade volume, < among other data, on their respective websites and through application < programming interfaces ("APIs"). < < For most of 2013, Mt. Gox (a Japanese Bitcoin Exchange operated at < www.mtgox.com by Tibanne Co. Ltd.) was the largest online Bitcoin < Exchange in the world. Supporting trading of bitcoin using sixteen (16) < different fiat currencies, Mt. Gox accounted for nearly three-quarters < of all Bitcoin Exchange Market trading during the first half of < 2013. By August 2013, although Mt. Gox's market share dropped to < just over fifty (50) percent according to Bitcoinity.org, the four < (4) largest Bitcoin Exchanges accounted for more than ninety (90) < percent of the Bitcoin Exchange Market volume. > currencies, Mt. Gox accounted for nearly three-quarters of all Bitcoin > Exchange Market trading during the first half of 2013. By August > 2013, although Mt. Gox's market share dropped to just over fifty > (50) percent according to Bitcoinity, the four (4) largest Bitcoin > Exchanges accounted for more than ninety (90) percent of the Bitcoin > Exchange Market volume. --- 5052c5430,5438 ----------------------- < exchanges such as BTC-e, Bitfinex and BitStamp. > exchanges such as BTC-e, Bitfinex and BitStamp. In January 2017, > the People's Bank of China announced that it had found several > violations, including margin financing and a failure to impose > anti-money laundering controls, after on-site inspections of two > China-based Bitcoin Exchanges. In response to the Chinese regulator's > oversight, the three largest China-based Bitcoin Exchanges, OKCoin, > Huobi, and BTC China, started charging trading commission fees to > suppress speculative trading and prevent price swings which resulted > in a significant drop in volume on these exchanges. --- 5062,5063c5448,5449 ----------------------- < amount. Mt. Gox also continued to delay U.S. Dollar withdrawals for < a matter of weeks or months from the withdrawal request date. > quantity. Mt. Gox also continued to delay U.S. Dollar withdrawals > for a matter of weeks or months from the withdrawal request date. --- 5088,5091c5474,5487 ----------------------- < As the Bitcoin Exchange Market has evolved, additional entrants have < emerged and there are numerous Bitcoin Exchanges. < Despite the regulatory uncertainty that has, at times, temporarily < limited the ability of > Bitcoin Exchanges may be susceptible to denial of service ("DoS") > attacks. In a DoS attack, an attacker bombards a Bitcoin Exchange > with a large quantity of external requests, thus precluding the > targeted Bitcoin Exchange from processing requests from genuine users, > effectively or literally knocking the Bitcoin Exchange offline. In a > DDoS Attack, the attacker gains control of and uses another party's > computer to launch the external requests. Mt. Gox was the victim > of three (3) DDoS Attacks in April 2013 alone. Other large Bitcoin > Exchanges also have suffered DDoS Attacks. DoS and DDoS Attacks can > cause the price of bitcoin to fall substantially. Users, miners and > service providers are similarly susceptible to such attacks. > The Bitcoin Network protocol and software programs have internal > mechanisms that mitigate but do not eliminate the likelihood and > effects of DoS attacks and DDoS Attacks. --- 5093c5489 ----------------------- < 56 > 60 --- 5097,5106c5493,5522 ----------------------- < Chinese Bitcoin Exchanges such as BTCChina, Huobi and OKCoin to receive < deposits of fiat currency, the policy of low or zero commission trading < on such China-based Bitcoin Exchanges has resulted in reported volumes < that exceed those of Bitcoin Exchanges primarily trading the BTC-USD < trading pair. According to Bitcoinity.org, in the six-month period < ended May 3, 2016, the trading pair of the Chinese Yuan and bitcoin < has had approximately 94.79 percent of the bitcoin trading market < (relative to other currency trading pairs), and has not accounted < for less than half of such market on any day during that period. < However, many Bitcoin enthusiasts are skeptical about the > Bitcoin Exchanges also may be the victims of breaches in information > security. In June 2011, a malicious actor hacked the Mt. Gox database > and stole thousands of usernames, passwords and email addresses. In > September 2012, Bitfloor was forced to go offline as a result of > an attack through which a hacker gained access to private keys and > twenty four thousand (24,000) bitcoin. > Additionally, in August 2016, Bitfinex, a Hong Kong-based Bitcoin > Exchange experienced a security breach resulting in the loss of > approximately one hundred twenty thousand (120,000) bitcoin worth > $65 million at the time.26 > > Bitcoin Exchanges Operate Globally and > Under Various Regulatory Regimes > > As the Bitcoin Exchange Market has evolved, additional entrants have > emerged and there are numerous Bitcoin Exchanges. > Despite the regulatory uncertainty that has, at times, temporarily > limited the ability of Chinese Bitcoin Exchanges such as BTCChina, > Huobi and OKCoin to receive deposits of fiat currency, the previous > policy of low or zero commission trading on such China-based Bitcoin > Exchanges has resulted in reported volumes that exceed those of > Bitcoin Exchanges primarily trading the BTC-USD trading pair. > However, the self-reported volumes are often considered suspect by > knowledgeable market participants. According to Bitcoinity's tally > of self-reported volumes, in the six-month period ending February 1, > 2017, the trading pair of the Chinese Yuan and bitcoin represents > approximately 95 percent of the bitcoin trading market (relative to > other currency trading pairs), and has not accounted for less than > half of such market on any day during that period. > However, many Bitcoin Exchange participants are skeptical about the --- 5108,5112c5524,5550 ----------------------- < Exchanges. During the six (6) month period, the BTC-USD trading pair < has accounted for approximately 4.07 percent of the total bitcoin < trading market < . Bitcoin trades denominated in Euros and British Pounds accounted < for 0.70 and 0.11 percent of the market, respectively. > Exchanges. During the same six-month period, the BTC-USD trading pair > has accounted for approximately 3 percent of the total self-reported > bitcoin trading market. Self-reported bitcoin trades denominated in > Euros and British Pounds accounted for 0.5 and 0.3 percent of the > market, respectively. > This significant disparity among the China-based Bitcoin Exchanges > and the other Bitcoin Exchanges will likely no longer continue due > to the People's Bank of China's oversight of China-based Bitcoin > Exchanges. In January 2017, the People's Bank of China announced > that it had found several violations, including margin financing and > a failure to impose anti-money laundering controls, after on-site > inspections of two China-based Bitcoin Exchanges. In response to > the Chinese regulator's oversight, the three largest China-based > Bitcoin Exchanges, OKCoin, Huobi, and BTC China, started charging > trading commission fees to suppress speculative trading and prevent > price swings which resulted in a significant drop in volume on these > exchanges that will likely continue going forward. > > Similarly, pricing on overseas Bitcoin Exchanges can make it > difficult to accurately ascertain the equivalent pricing denominated > in U.S. Dollars. Various publicly available data published by > Blockchain Data LTD and others track foreign (fiat) currency arbitrage > opportunities across global jurisdictions and currencies. For the > six-month period ending February 1, 2017, daily bitcoin prices across > U.S. Dollars, euros, Chinese RMB, British Pounds, and Canadian Dollars > deviated by less than 1.9 percent on average and 3.1 at most, using > standard spot foreign exchange rates. --- 5117,5119c5555,5557 ----------------------- < on Bitcoinity.org for the six (6) month period ended May 3, 2016 are < located in Hong Kong, Singapore, and China. The level of protections < and security varies on Bitcoin Exchanges and most Bitcoin Exchanges are > from Bitcoinity for the six-month period ending February 1, 2017 are > located in Hong Kong, the U.S., and China. The level of protections and > security varies on Bitcoin Exchanges and most Bitcoin Exchanges are --- 5132,5135c5570,5584 ----------------------- < As noted above, Gemini Exchange, an affiliate of the Sponsor and < the source of the Gemini Exchange Spot Price used by the Trust < to calculate its NAV, operates the website www.gemini.com. Gemini < Exchange is owned and operated by Gemini Trust Company, LLC, the > 26 Such attacks have caused multiple Bitcoin Exchanges to close for > brief periods. Hackers also can target users, miners and service > providers. > These attacks reflect negatively on the effectiveness of security > measures undertaken by some participants in the Bitcoin economy and do > not reflect the inherent cryptographic security of the Bitcoin Network. > > 61 > > Table of Contents > > Gemini Exchange is an affiliate of the Sponsor and the source of > the Gemini Exchange Auction Price used by the Trust to calculate its > NAV. Gemini Exchange is owned and operated by Gemini Trust Company, > LLC, the --- 5147,5177d5595 ----------------------- < Bitcoin Exchanges may be susceptible to denial of service ("DoS") < attacks. In a DoS attack, an attacker bombards a Bitcoin Exchange < with a large quantity of external requests, thus precluding the < targeted Bitcoin Exchange from processing requests from genuine users, < effectively or literally knocking the Bitcoin Exchange offline. In a < DDoS attack, the attacker gains control of and uses another party's < computer to launch the external requests. Mt. Gox was the victim < of three (3) DDoS Attacks in April 2013 alone. Other large Bitcoin < Exchanges also have suffered DDoS Attacks. DoS and DDoS attacks can < cause the price of bitcoin to fall substantially. Users, miners and < service providers are similarly susceptible to such attacks. < The Bitcoin Network protocol and software programs have internal < mechanisms that mitigate but do not eliminate the likelihood and < effects of DoS attacks and DDoS Attacks. < < Bitcoin Exchanges also may be the victims of breaches in information < security. In June 2011, a malicious actor hacked the Mt. Gox database < and stole thousands of usernames, passwords and email addresses. In < September 2012, Bitfloor was forced to go offline as a result of < an attack through which a hacker gained access to private keys and < twenty four thousand (24,000) bitcoin. Such attacks have caused < multiple Bitcoin Exchanges to close for brief periods. Hackers also < can target users, miners and service providers. < These attacks reflect negatively on the effectiveness of security < measures undertaken by some participants in the Bitcoin economy and do < not reflect the inherent cryptographic security of the Bitcoin Network. < < 57 < < Table of Contents < --- 5241,5246c5659,5666 ----------------------- < volume of actual bitcoin trades. CFTC commissioners have previously < expressed publicly that derivatives based on Digital Assets such as < bitcoin are subject to regulation by the CFTC, including oversight to < prevent market manipulation of the price of bitcoin. As previously < noted, in the September 2015 Coinflip case, the CFTC instituted and < settled administrative proceedings that involved a bitcoin derivatives > volume of actual bitcoin trades. As previously noted, in the September > 2015 Coinflip case, the CFTC instituted and settled administrative > proceedings that involved a bitcoin derivatives > > 62 > > Table of Contents > --- 5253,5263c5673,5679 ----------------------- < platform. While the SEC has not opined on the legal characterization < of bitcoin as a security, it has taken various actions against persons < or entities misusing bitcoin < < 58 < < Table of Contents < < in connection with fraudulent schemes (i.e., Ponzi schemes), inaccurate < and inadequate publicly disseminated information, and the offering < of unregistered securities.16 > platform, including anti-manipulation provisions. While the SEC has > not opined on the legal characterization of bitcoin as a security, > it has taken various actions against persons or entities misusing > bitcoin in connection with fraudulent schemes (i.e., Ponzi schemes), > inaccurate and inadequate publicly disseminated information, the > offering of unregistered securities, and an unauthorized share > redemption program.27 --- 5271c5687 ----------------------- < Overstock.com and TigerDirect began accepting Bitcoin payments. Over > Overstock and TigerDirect began accepting Bitcoin payments. Over --- 5275,5296c5691,5715 ----------------------- < company Dell began accepting bitcoin. There are thousands of additional < online merchants that accept bitcoin, and the variety of goods and < services for which bitcoin can be exchanged is increasing. Currently, < local, regional and national businesses, including Time Inc., < Wikimedia, WordPress, Expedia and Foodler, accept bitcoin < . Bitcoin service providers such as BitPay, Coinbase and GoCoin and < online gift card retailer Gyft provide other means to spend bitcoin < for goods and services at additional retailers. There are also many < real-world locations that accept bitcoin throughout the world. < < As of April 2016, it was estimated that as many as one hundred thousand < (100,000) merchants or businesses accept, or have the technological < infrastructure to choose to accept (e.g., Shopify merchants), bitcoin < as payment. In September 2014, payments giant PayPal announced < a partnership with BitPay, Coinbase and GoCoin to expand their < Bitcoin-related services to PayPal's merchant customers, thereby < significantly expanding the reach of bitcoin-accepting merchants. To < date, the rate of consumer adoption and use of bitcoin in paying < merchants has trailed the broad expansion of retail and commercial < acceptance of bitcoin. Nevertheless, there will likely be a strong < correlation between continued expansion of the Bitcoin Network and < its retail and commercial market penetration. > company Dell began accepting bitcoin. > Additionally, Apple, Inc. approved the inclusion of certain approved > bitcoin wallet applications on the Apple App Store. There are > thousands of additional online merchants that accept bitcoin, and > the variety of goods and services for which bitcoin can be exchanged > is increasing. Currently, local, regional and national businesses, > including Time Inc., Wikimedia, WordPress, Expedia and Foodler, > accept bitcoin > . Bitcoin service providers such as BitPay, and Coinbase provide means > to spend bitcoin for goods and services at additional retailers. There > are also many real-world locations that accept bitcoin throughout > the world. > > As of February 2017, it was estimated that as many as one hundred > thousand (100,000) merchants or businesses accept, or have the > technological infrastructure to choose to accept (e.g., Shopify > merchants), bitcoin as payment. In September 2014, payments giant > PayPal announced a partnership with merchant processors including > BitPay and Coinbase to expand their Bitcoin-related services to > PayPal's merchant customers, thereby significantly expanding the reach > of bitcoin-accepting merchants. To date, the rate of consumer adoption > and use of bitcoin in paying merchants has trailed the broad expansion > of retail and commercial acceptance of bitcoin. Nevertheless, there > will likely be a strong correlation between continued expansion of > the Bitcoin Network and its retail and commercial market penetration. --- 5325a5745,5752 ----------------------- > > 27 > See supra note 3. > > 63 > > Table of Contents > --- 5336,5354c5763,5772 ----------------------- < illegal substances prior to < < 16 < < See, supra note 3. < < 59 < < Table of Contents < < its seizure and the arrest of its founder and operator in October 2013, < accepted only bitcoin. < Although the SEC has not opined on the legal characterization of < bitcoin as a security, it has taken various actions against persons < or entities misusing bitcoin in connection with fraudulent schemes < (i.e., Ponzi schemes), inaccurate and inadequate publicly disseminated < information, and the offering of unregistered securities.17 The use < of bitcoin for illicit purposes, however, is not promoted by the < Bitcoin Network or the user community as a whole. > illegal substances prior to its seizure and the arrest of its founder > and operator in October 2013, accepted only bitcoin. > Although the SEC has not opined on the legal characterization > of bitcoin as a security, it has taken various actions against > persons or entities misusing bitcoin in connection with fraudulent > schemes (i.e., Ponzi schemes), inaccurate and inadequate publicly > disseminated information, the offering of unregistered securities, > and an unauthorized share redemption program.28 The use of bitcoin > for illicit purposes, however, is not promoted by the Bitcoin Network > or the user community as a whole. --- 5403,5416c5821,5826 ----------------------- < bitcoin as a security, it has taken various actions against persons or < entities misusing bitcoin in connection with fraudulent schemes (i.e., < Ponzi schemes), inaccurate and inadequate publicly disseminated < information, and the offering of unregistered securities.18 < Commissioners of the CFTC initially expressed the belief that bitcoin < met the definition of a commodity and that the CFTC has regulatory < authority over futures and other derivatives based on Digital Assets, < subject to facts and circumstances. < The Sponsor also espoused the view that, on balance, the important < features of bitcoin and other Digital Assets are those that are < characteristics of commodities and therefore has referred to and < discussed these assets as such. Additional clarity was obtained < on September 17, 2015, when the CFTC instituted and settled the < Coinflip case. > bitcoin as a security, it has taken various actions against persons > or entities misusing bitcoin in connection with fraudulent schemes > (i.e., Ponzi schemes), inaccurate and inadequate publicly disseminated > information, and the offering of unregistered securities.29Clarity > regarding the treatment of bitcoin was obtained on September 17, > 2015, when the CFTC instituted and settled the Coinflip case. --- 5418,5422c5828 ----------------------- < (i) conducted activity related to commodity options transactions < without complying with the provisions of the CEA and CFTC regulations, < and < (ii) operated a facility for the trading of swaps without registering < the facility as a SEF or DCM. > (i) conducted activity --- 5424,5425c5830,5833 ----------------------- < 17 See, supra note 3. < 18 See, supra note 3. > 28 > See supra note 3. > 29 > See supra note 3. --- 5427c5835 ----------------------- < 60 > 64 --- 5430a5839,5842 ----------------------- > related to commodity options transactions without complying with the > provisions of the CEA and CFTC regulations, and > (ii) operated a facility for the trading of swaps without registering > the facility as a SEF or DCM. --- 5457c5869 ----------------------- < or financed basis" without first registering with the CFTC.19 > or financed basis" without first registering with the CFTC.30 --- 5460,5473c5872,5889 ----------------------- < virtual currencies, such as bitcoin, for U.S. federal income tax < purposes. The guidance, the first issued by a U.S. government agency < regarding the asset classification of bitcoin, classified bitcoin < as "property" for U.S. federal income tax purposes. The guidance < clarified that bitcoin could be held as capital assets and that < holders of bitcoin were required to track gains and losses relating < to their cost basis at acquisition and their amount realized upon < sale or other disposition of the bitcoin. The IRS also clarified < that bitcoin received as payment (e.g., as wages or, in the case of a < miner, as a reward for solving a block) would be taxable as ordinary < income using the fair market value of bitcoin when received. The < asset classification of bitcoin by the IRS is not controlling on < other government agencies for purposes other than those relating to < U.S. federal income tax. > virtual convertible currencies, such as bitcoin, for U.S. federal > income tax purposes. The guidance, the first issued by a > U.S. government agency regarding the asset classification of > bitcoin, classified bitcoin as "property" that it is not currency > for U.S. federal income tax purposes. The guidance clarified that > bitcoin could be held as capital assets and that holders of bitcoin > were required to track gains and losses relating to their cost > basis at acquisition and their amount realized upon sale or other > disposition of the bitcoin. The IRS also clarified that bitcoin > received as payment (e.g., as wages or, in the case of a miner, as > a reward for solving a block) is included in the recipient's taxable > income based on the fair market value of bitcoin when received. The > IRS may revisit its treatment of digital currencies, including seeking > enforcement of existing guidance or issuing new guidance, in response > to recommendations in a September 2016 report by the U.S. Treasury > Inspector General for Tax Administration.31 The asset classification > of bitcoin by the IRS is not controlling on other government agencies > for purposes other than those relating to U.S. federal income tax. --- 5496,5500c5912,5931 ----------------------- < State Bank Supervisors had initiated formal inquiries into or < held hearings on Digital Assets, including bitcoin, and possible < regulation thereof. Members of the private sector and representatives < of the Department of Justice, Secret Service and FinCEN (among other < government agencies) had participated in such inquiries and hearings. > State Bank Supervisors had initiated formal inquiries into or held > hearings on Digital Assets, > > 30 > See supra note 5. > 31 > > See U.S. Treasury Inspector General for Tax Administration, As the Use > of Virtual Currencies in Taxable Transactions Becomes More Common, > Additional Actions are Needed to Ensure Taxpayer Compliance, Notice > 2016-30-083 (Sept. 21, 2016). > > 65 > > Table of Contents > > including bitcoin, and possible regulation thereof. Members of the > private sector and representatives of the Department of Justice, > Secret Service and FinCEN (among other government agencies) had > participated in such inquiries and hearings. --- 5508,5523c5939,5944 ----------------------- < adopted < < 19 < < See supra, note 5. < < 61 < < Table of Contents < < legislation that would formally repeal laws that could be interpreted < as making illegal the use of bitcoin or other Digital Assets as < a means of payment. In February 2015, a bill was introduced in < the California State Assembly to establish a licensing regime for < businesses engaging in virtual currencies. In September 2015, the < bill was ordered to become an inactive file and as of the date of > adopted legislation that would formally repeal laws that could be > interpreted as making illegal the use of bitcoin or other Digital > Assets as a means of payment. In February 2015, a bill was introduced > in the California State Assembly to establish a licensing regime > for businesses engaging in virtual currencies. In September 2015, > the bill was ordered to become an inactive file and as of the date of --- 5525c5946,5947 ----------------------- < by the California State Assembly. > by the California State Assembly. As of August 2016, the bill was > withdrawn from consideration for vote for the remainder of the year. --- 5539,5541c5961,5963 ----------------------- < have robust cyber security policies and incorporate a variety of other < compliance policies. As of April 2016, the NYSDFS has granted one (1) < "BitLicense" to a market participant. > have robust cyber security policies and incorporate a variety of > other compliance policies. As of June 2016, the NYSDFS has granted a > "BitLicense" to two (2) market participants. --- 5584,5594c6006,6007 ----------------------- < exception reserved for transactions related to currency, bank < notes, and other legal tender, and thus the bitcoin trading could < be exempted from VAT. The ruling shows that bitcoin tax treatment < in the European Union has moved more closely in-line with that of < conventional currency. Foreign government bodies have also initiated < public inquiries similar to those taken by U.S. government bodies, < including public hearings on Digital Assets, including bitcoin, < held by both the French and Canadian Senates. In October 2015, the < European Court of Justice determined that exchanging transactions in < Digital Assets are exempt from value-added taxes in the same manner < as traditional currencies. > exception reserved for transactions related to currency, bank notes, > and other legal tender, --- 5596,5601c6009 ----------------------- < On December 5, 2013, the People's Bank of China and five Chinese < ministries released a notice that restricted Bitcoin activity among < its financial and payment institutions while classifying bitcoin as a < "virtual < < 62 > 66 --- 5605,5609c6013,6036 ----------------------- < commodity" that was legal to own and speculate in. Over the subsequent < six (6) months, news reports from China indicated that many banking < institutions and third-party payment processors in China had received < private guidance leading them to close Bitcoin Exchange bank accounts < that held Chinese Yuan on behalf of exchange customers. > and thus the bitcoin trading could be exempted from VAT. The ruling > shows that bitcoin tax treatment in the European Union has moved > more closely in-line with that of conventional currency. Foreign > government bodies have also initiated public inquiries similar to > those taken by U.S. government bodies, including public hearings on > Digital Assets, including bitcoin, held by both the French and Canadian > Senates. In October 2015, the European Court of Justice determined that > exchanging transactions in Digital Assets are exempt from value-added > taxes in the same manner as traditional currencies. In July 2016, > the European Commission released a draft directive that proposed > applying counter-terrorism and anti-money laundering regulations to > virtual currencies, and in September 2016, the > European Banking authority advised the European Commission to institute > new regulation specific to virtual currencies, with amendments to > existing regulation as a stopgap measure. > > On December 5, 2013, the People's Bank of China and five Chinese > ministries released a notice that restricted Bitcoin activity among > its financial and payment institutions while classifying bitcoin as a > "virtual commodity" that was legal to own and speculate in. Over the > subsequent six (6) months, news reports from China indicated that many > banking institutions and third-party payment processors in China had > received private guidance leading them to close Bitcoin Exchange bank > accounts that held Chinese Yuan on behalf of exchange customers. --- 5618,5620c6045,6055 ----------------------- < 2016, the People's Bank of China, China's central bank, disclosed < that it has been studying a state-backed electronic monetary system < and potentially had plans for its own state-backed electronic money. > 2016, the People's Bank of China, China's central bank, disclosed that > it has been studying a state-backed electronic monetary system and > potentially had plans for its own state-backed electronic money. In > January 2017, the People's Bank of China announced that it had found > several violations, including margin financing and a failure to impose > anti-money laundering controls, after on-site inspections of two > China-based Bitcoin Exchanges. In response to the Chinese regulator's > oversight, the three largest China-based Bitcoin Exchanges, OKCoin, > Huobi, and BTC China, started charging trading commission fees to > suppress speculative trading and prevent price swings which resulted > in a significant drop in volume on these exchanges. --- 5627,5636c6062,6072 ----------------------- < Additionally, a central bank statement warned of the association of < Bitcoin and money laundering and terrorist activity. In early February, < a prosecutor implied that the use of Bitcoin and bitcoin themselves < were not legal tender and were illegal, although whether this amounted < to a ban on Bitcoin has been questioned. In April 2016, it was reported < that the Russian Finance Ministry is considering proposing regulations < that would prohibit the issuance of all Digital Assets or their use in < exchange for goods or services in Russia. The legal status of Bitcoin < in Russia remains unclear, though the recently hostile approach of < certain government arms indicates a restrictive environment. > Additionally, a central bank statement warned of the association > of Bitcoin and money laundering and terrorist activity. In early > February, a prosecutor implied that the use of Bitcoin and bitcoin > themselves were not legal tender and were illegal, although whether > this amounted to a ban on Bitcoin has been questioned. In April 2016, > it was reported that the Russian Finance Ministry was considering > proposing regulations that would prohibit the issuance of all Digital > Assets or their use in exchange for goods or services in Russia. > However, in July 2016, in a significant change in tone, the Russian > Ministry of Finance indicated it supports a proposed law that bans > bitcoin domestically but allows for its use as a foreign currency. --- 5658,5662c6094,6103 ----------------------- < issued guidance on the further development and future application < of laws to Bitcoin-related activity in Switzerland. Among others, < Australia, Finland and the Netherlands have joined Canada and Germany < among the foreign countries releasing formal or informal tax guidance < regarding Bitcoin income or operations. > issued guidance on the further development and > > 67 > > Table of Contents > > future application of laws to Bitcoin-related activity in > Switzerland. Among others, Australia, Finland and the Netherlands > have joined Canada and Germany among the foreign countries releasing > formal or informal tax guidance regarding Bitcoin income or operations. --- 5685,5688d6125 ----------------------- < 63 < < Table of Contents < --- 5725c6162 ----------------------- < 64 > 68 --- 5733c6170 ----------------------- < the Authorized Participants with the Custodian as consideration, > the Authorized Participants with the Custodian as consideration; --- 5736c6173 ----------------------- < and other liabilities, > and other liabilities; --- 5738,5740c6175,6177 ----------------------- < for redemption by the Authorized Participants, < (iv) causing the Administrator to sell bitcoin on the termination of < the Trust, and > for redemption by the Authorized Participants; > (iv) causing the Trustee to sell bitcoin on the termination of the > Trust; and --- 5742,5745c6179,6182 ----------------------- < to accomplish such activities in accordance with the provisions of < the Trust Agreement, the Trust Servicing Agreement, the Trust Agency < Service Provider Agreement, the Trust Custody Agreement, the License < Agreement (as defined below under " > to accomplish such activities in accordance with the provisions of the > Trust Agreement, the Administration Agreement, the Transfer Agency and > Services Agreement, the Trust Custody Agreement, the License Agreement > (as defined below under " --- 5754,5756c6191,6193 ----------------------- < The investment objective of the Trust is for the Shares to track < the price of bitcoin as measured at 4:00 p.m. Eastern time using the < Gemini Exchange Spot Price on each Business Day, less the > The investment objective of the Trust is for the Shares to track the > price of bitcoin using > the Gemini Exchange Auction Price on each Business Day, less the --- 5776c6213 ----------------------- < value to [0.10] bitcoin. The logistics of accepting, transferring > value to [0.01] bitcoin. The logistics of accepting, transferring --- 5797,5799c6234,6236 ----------------------- < o Exchange-Traded and Transparent. The Shares will be listed and trade < on Bats, providing investors with an efficient means to implement < various investment strategies. > Exchange-Traded and Transparent. The Shares will be listed on Bats, > providing investors with an efficient means to implement various > investment strategies. --- 5805,5806c6242,6243 ----------------------- < Trust's holdings will be reported each day on www.[ ].com, the < Trust's website. > Trust's holdings will be reported each day on www.coin-etf.com, the > Trust's website, and in quarterly financial statements. --- 5810c6247 ----------------------- < The Sponsor represents that the Trust will > The Sponsor represents that --- 5812c6249 ----------------------- < 65 > 69 --- 5816,5817c6253,6255 ----------------------- < enter into an information sharing agreement with the Gemini Exchange < enabling it to obtain and publish the Gemini Exchange Spot Price on the > the Trust will enter into an information sharing agreement with the > Gemini Exchange enabling it to obtain and publish > the Gemini Exchange Auction Price on the --- 5821,5823c6259,6262 ----------------------- < regarding the Gemini Exchange Spot Price and other trading data with < the Exchange. < See "Bitcoin Value-Gemini Exchange Spot Price" above. Lastly, the > regarding > the Gemini Exchange Auction Price and other trading data with the > Exchange. > See "Bitcoin Value-Gemini Exchange Auction Price" above. Lastly, the --- 5843c6282 ----------------------- < o Proprietary Cold Storage System. > o Proprietary Cold Storage of Private Keys. --- 5851c6290 ----------------------- < o Cold Storage of Private Keys. > o Private Key Management. --- 5857c6296 ----------------------- < of FIPS PUB 140-2 Level 3 (or higher). HSMs (each, a "Signer") are > of FIPS PUB 140-2 Level 3 (or higher).32 HSMs (each, a "Signer") are --- 5862,5864c6301,6303 ----------------------- < ("Multisig") technology with an "M-of-N" signing design that requires a < signature from more than one Signer (but fewer than the full complement < of potential Signers) in order to move the > ("Multisig") technology with a "2-of-3" signing design that requires > a signature from at least two (2) of three (3) potential Signers in > order to move the --- 5869,5871c6308,6316 ----------------------- < In addition, the operation of a Signer requires the coordinated < actions of multiple employees (each a "Signatory") to protect against < insider malfeasance. Lastly, the Cold Storage System is comprised > In addition, the operation of a Signer requires the coordinated actions > of multiple employees (each a "Signatory") to protect against insider > malfeasance. All Signatories have undergone background checks by a > third-party vendor and are subject to, with or without the Signatory's > knowledge, ongoing background checks at the discretion of the > Custodian. All Signatories have been fingerprinted, and all fingerprint > cards and accompanying information are retained by the Custodian for > the duration of the Signatory's tenure and for a minimum of three > (3) years thereafter. Lastly, the Cold Storage System is comprised --- 5886,5887c6331,6349 ----------------------- < keys in locations around the world, or may use financial instruments < to seek their investment objectives. The geographic and political > keys in > > 32 > > NIST issued FIPS PUB 140-2 to coordinate the requirements and standards > for the secure design and implementation of cryptographic modules > that include both hardware and software components and it defines > four increasing, qualitative levels of security. > See National Institute for Standards and Technology, "Security > Requirements for Cryptographic Modules" Federal Information Processing > Standards Publication 140-2 (updated Dec. 3, 2002). > See also, supra note 17. > > 70 > > Table of Contents > > locations around the world, or may use financial instruments to > seek their investment objectives. The geographic and political --- 5892,5898c6354,6361 ----------------------- < The Custodian has authorized Sponsor to engage an independent audit < firm to periodically audit the Custodian's Cold Storage system < protocols and internal controls ("Internal Controls Audit"), and < report to the Sponsor at least annually on such matters. < The Sponsor will pay costs relating to the engagement of the < independent audit firm, as well as the costs of any repairs or upgrades < to the Cold Storage System, up to a total amount of $[ ]. > The Custodian will engage an independent auditor to periodically audit > the Custodian's Cold Storage system protocols and internal controls > ("Internal Controls Audit"). > The Custodian will pay costs relating to the engagement of the > independent auditor, as well as the costs of any repairs or upgrades > to the Cold Storage System. > The Custodian will share any reports related to the Internal Controls > Audit with the Sponsor. --- 5900,5902d6362 ----------------------- < 66 < < Table of Contents --- 5907,5915c6367,6375 ----------------------- < The Custodian has authorized the Sponsor to engage an independent < audit firm to biannually verify that the Custodian can demonstrate < "proof of control" of the private keys that control the < Trust's bitcoin ("Proof of Control Audit"). One (1) Proof of Control < Audit will be conducted at the end of each calendar year and the other < at random, with the consent of the Custodian, on a date selected by < the Sponsor. Other Digital Asset ETPs may not be able to or willing < to provide "proof of control" of the private keys that control their < bitcoin. > The Sponsor and the Custodian have engaged an independent auditor > to examine and attest that the Custodian can demonstrate "proof of > control" of the private keys that control the > Trust's bitcoin ("Proof of Control Examination") on a monthly > basis. Other Digital Asset ETPs may not be able to or willing to > provide "proof of control" of the private keys that control their > bitcoin. The results of each monthly Proof of Control Examination > will be made available on the > Trust's website. --- 5926,5929c6386,6387 ----------------------- < ETPs that use cold storage may use not < (i) use a custodian or < (ii) may use custodians other than the Gemini Trust Company, LLC to < hold their private keys. > ETPs that use cold storage may not use a licensed custodian or a > fiduciary to their private keys. --- 5940,5941c6398,6399 ----------------------- < The Shares are intended to track the price of bitcoin as measured at < 4:00 p.m. Eastern time using the Gemini Exchange Spot Price, less the > The Shares are intended to track the price of bitcoin using > the Gemini Exchange Auction Price, less the --- 5952,5962c6410,6423 ----------------------- < Trust's investment objective is for the Shares to track the price < of bitcoin as measured at 4:00 p.m. Eastern time using the Gemini < Exchange Spot Price on each Business Day, the Shares may trade in the < secondary market on Bats at prices that are lower or higher relative < to the NAV. The amount of the discount or premium in the trading < price relative to the NAV may be influenced by non-concurrent trading < hours and liquidity between Bats and larger Bitcoin Exchanges in the < Bitcoin Exchange Market. While the Shares will be listed and trade < on Bats from 9:30 a.m. until 4:00 p.m. Eastern time, liquidity in < the global bitcoin markets may fluctuate depending upon the volume < and availability of larger Bitcoin Exchanges. > Trust's investment objective is for the Shares to track the price of > bitcoin using > the Gemini Exchange Auction Price on each Business Day, the Shares > may trade in the secondary market on Bats at prices that are lower or > higher relative to the NAV. The amount of the discount or premium > in the trading price relative to the NAV may be influenced by > non-concurrent trading hours and liquidity between Bats and larger > Bitcoin Exchanges in the Bitcoin Exchange Market. While the Shares > will be listed on Bats, which has its Regular Trading Session from > 9:30 a.m. until 4:00 p.m. Eastern Time on Business Days, shares may > be traded at other times and in other venues. > The price of Shares may reflect the liquidity in the global bitcoin > markets, which may fluctuate depending upon the volume and availability > of larger Bitcoin Exchanges. --- 5964c6425 ----------------------- < is limited or a major Bitcoin Exchange is off-line, trading spreads, > is limited or a major Bitcoin Exchange is offline, trading spreads, --- 5973,5983c6434 ----------------------- < marketing expenses incurred by the Trust: the Trustee's monthly fee < and reimbursable expenses (including indemnification amounts) under < the Trust Agreement, the Administrator's monthly fees and reimbursable < expenses under the Trust Servicing Agreement, the Trust Agency Service < Provider's monthly fees and reimbursable expenses under the Trust < Agency Service Provider Agreement, the Custodian's monthly fees and < reimbursable expenses under the Trust Custody Agreement, Exchange < listing fees, SEC registration fees, printing and mailing costs, < costs associated with maintaining the < Trust's website, audit fees, up to $[ ] per annum in marketing expenses < and up > marketing expenses --- 5985c6436 ----------------------- < 67 > 71 --- 5989,5991c6440,6449 ----------------------- < to $[100,000] per annum in legal expenses. < Any such amounts in excess of $[ ] per annum will be borne by the < Trust as extraordinary expenses. > incurred by the Trust: the Trustee's monthly fee and reimbursable > expenses (including indemnification amounts) under the Trust Agreement, > the Administrator's monthly fees and reimbursable expenses under > the Administration Agreement, the Transfer Agent's monthly fees and > reimbursable expenses under the Transfer Agency and Services Agreement, > the Custodian's monthly fees and reimbursable expenses under the > Trust Custody Agreement, Exchange listing fees, SEC registration fees, > printing and mailing costs, costs associated with maintaining the > Trust's website, audit fees, marketing expenses, and up to $100,000 > per annum in legal expenses. --- 6008,6028c6466,6486 ----------------------- < Upon the receipt of written instructions from the Administrator, < the Custodian will transfer bitcoin from the Trust Custody Account < to the Trust Expense Account to permit the payment of Trust Expenses < not assumed by the Sponsor. < The Administrator will, when directed by the Sponsor, and, in the < absence of such direction, may, in its own discretion, instruct the < Custodian to the transfer the bitcoin needed to pay extraordinary < expenses to the Trust Expense Account. Once such bitcoin is in the < Trust Expense Account, the Administrator may sell, or cause to be < sold, such number of bitcoin at such times as may be necessary to < permit payment in cash of Trust expenses not assumed by the Sponsor. < The Custodian will transfer bitcoin from the Trust Custody Account to < the Trust Expense Account at such times and in the smallest amounts < required to permit such payments as they become due. Accordingly, < the number of bitcoin to be transferred out of the Trust Custody < Account will vary from time to time depending on the level of the < Trust's expenses and the Gemini Exchange Spot Price. < < If the Administrator sells, or causes to be sold, bitcoin in the < Trust Expense Account, any cash received by the Administrator pending < payment of the > Upon the receipt of written instructions from the Sponsor, and based on > amounts determined by the Administrator, the Custodian will transfer > bitcoin from the Trust Custody Account to the Trust Expense Account > to permit the payment of Trust Expenses not assumed by the Sponsor. > The Sponsor will instruct the Custodian to the transfer the quantity > of bitcoin needed to pay extraordinary expenses to the Trust Expense > Account. Once such bitcoin is in the Trust Expense Account, the > Custodian will sell such number of bitcoin at such times as may be > necessary to permit payment in cash of Trust expenses not assumed by > the Sponsor. > The Custodian will transfer bitcoin from the Trust Custody Account > to the Trust Expense Account at such times required to permit such > payments as they become due. Accordingly, the number of bitcoin to > be transferred out of the Trust Custody Account will vary from time > to time depending on the level of the > Trust's expenses and > the Gemini Exchange Auction Price. > > If the Administrator instructs the Sponsor or the Custodian to sell > bitcoin in the Trust Expense Account, any cash received by the seller > pending payment of the --- 6030,6033c6488,6493 ----------------------- < To the extent the Administrator transfers to the Trust Expense Account < bitcoin in excess of the amount needed to pay the < Trust's extraordinary expenses, the Administrator will promptly return < such remaining bitcoin by transfer to the Trust Custody Account. > To the extent the Administrator instructs the Sponsor or the Custodian > to transfer to the Trust Expense Account bitcoin in excess of the > quantity needed to pay the > Trust's extraordinary expenses, the Administrator will instruct the > Custodian to promptly return such remaining bitcoin by transfer to > the Trust Custody Account. --- 6053a6514,6518 ----------------------- > any other expenses and charges as > the Sponsor may, in its sole discretion, deem necessary or proper > to incur; > o > --- 6060c6525 ----------------------- < any indemnification of the Sponsor, Administrator or other agents, > any indemnification of the Custodian, Administrator or other agents, --- 6063c6528,6529 ----------------------- < The Administrator, at the direction of the Sponsor, may liquidate the > The Sponsor or the Custodian, at the direction of the Sponsor, may > liquidate the --- 6066a6533,6536 ----------------------- > 72 > > Table of Contents > --- 6073,6080c6543,6544 ----------------------- < of all < < 68 < < Table of Contents < < Trust expenses not assumed by the Sponsor. The purchase price received < as consideration for such sales will be the > of all Trust expenses not assumed by the Sponsor. The purchase price > received as consideration for such sales will be the --- 6113,6117c6577,6578 ----------------------- < Hypothetical price per bitcoin < $ 100.00 $ 100.00 $ 100.00 < < Sponsor's Fee < 0.[ ] % 0.[ ] % 0.[ ] % > Hypothetical price (per bitcoin) > $ 800.00 $ 800.00 $ 800.00 --- 6119,6120c6580 ----------------------- < Shares of Trust, beginning < [ ],000.00 [ ],000.00 [ ],000.00 > Expenses: --- 6122,6126c6582,6583 ----------------------- < Bitcoin in Trust, beginning < [ ].00 [ ].[ ] [ ].[ ] < < Hypothetical value of bitcoin in Trust < $ [ ],000,000.00 $ [ ].[ ] $ [ ].[ ] > Sponsor's Fee % > 0.[ ] % 0.[ ] % 0.[ ] % --- 6128,6129c6585,6586 ----------------------- < Beginning net asset value of the Trust < $ [ ].[ ] $ [ ].[ ] $ [ ].[ ] > Sponsor's Fee in Bitcoin > [ ].[ ] [ ].[ ] [ ].[ ] --- 6131c6588 ----------------------- < Sponsor's Fee > Beginning Bitcoin in Trust --- 6134c6591 ----------------------- < Bitcoin in Trust, ending > Less: Bitcoin to be delivered to cover the Sponsor's Fee --- 6137c6594 ----------------------- < Bitcoin to be delivered to cover the Sponsor's Fee > Ending Bitcoin in Trust --- 6139a6597,6602 ----------------------- > Beginning net asset value of the Trust > $ [ ].[ ] $ [ ].[ ] $ [ ].[ ] > > Less: Sponsor's Fee in $ > $ [ ].[ ] $ [ ].[ ] $ [ ].[ ] > --- 6143c6606,6609 ----------------------- < Ending NAV > Shares Outstanding > [ ],000.00 [ ],000.00 [ ],000.00 > > NAV (per share) --- 6146c6612 ----------------------- < 69 > 73 --- 6152,6158c6618,6624 ----------------------- < The Trust is a Delaware Statutory Trust formed on December 30, < 2014, by the filing of the Certificate of Trust with the Delaware < Secretary of State in accordance with the provisions of the DSTA, < and operates pursuant to the Trust Agreement and through the related < documents authorized by the Trust Agreement, including the Trust < Servicing Agreement, the Trust Agency Service Provider Agreement, < and the Trust Custody Agreement. > The Trust is a Delaware Statutory Trust formed on December 30, 2014, > by the filing of the Certificate of Trust with the Delaware Secretary > of State in accordance with the provisions of the DSTA, and operates > pursuant to the Trust Agreement and through the related documents > authorized by the Trust Agreement, including the Administration > Agreement, the Transfer Agency and Services Agreement, and the Trust > Custody Agreement. --- 6165,6166c6631,6632 ----------------------- < On a creation, Baskets will be distributed to the Authorized < Participants by the Trust in exchange for the delivery to the Trust > On a creation, Baskets will be distributed to the creating Authorized > Participant by the Trust in exchange for the delivery to the Trust --- 6168,6176c6634,6642 ----------------------- < to the value of the Shares being purchased). < On a redemption, the Trust will distribute bitcoin equal in value to < the value of the Shares being redeemed to the redeeming Authorized < Participant in exchange for the delivery to the Trust of one or < more Baskets. < On each Business Day, the value of each Basket accepted by the < Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value < of the Basket will be equal to the value of 50,000 Shares at their > to the NAV multiplied by the number of Shares in the Basket). > On a redemption, the Trust will distribute bitcoin equal in value > to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. > On each Business Day, the value of each Basket accepted by the Transfer > Agent in a creation or redemption transaction will be the same (i.e., > each Basket will initially consist of 100,000 Shares and the value > of the Basket will be equal to the value of 100,000 Shares at their --- 6180,6181c6646,6647 ----------------------- < price of bitcoin, as measured at 4:00 p.m. Eastern time using the < Gemini Exchange Spot Price on each Business Day, less the > price of bitcoin using > the Gemini Exchange Auction Price on each Business Day, less the --- 6191c6657 ----------------------- < Description of the Trust Servicing Agreement," " > Description of the Administration Agreement," " --- 6193c6659 ----------------------- < Description of the Trust Agency Service Provider Agreement" and " > Description of the Transfer Agency and Services Agreement" and " --- 6204,6210c6670,6676 ----------------------- < (i) transferred to pay the Sponsor's Fee, < (ii) distributed to Authorized Participants in connection with the < redemption of Baskets, < (iii) transferred to the Trust Expense Account to be sold on an < as-needed basis to pay Trust expenses not assumed by the Sponsor, or < (iv) sold on behalf of the Trust in the event the Trust terminates and < liquidates its assets or as otherwise required by law or regulation. > (i) distributed to Authorized Participants in connection with the > redemption of Baskets; > (ii) transferred to pay the Sponsor's Fee; > (iii) transferred and sold as needed to pay the > Trust's expenses not assumed by the Sponsor; or > (iv) sold in connection with the termination and liquidation of the > Trust or as otherwise required by law or regulation. --- 6241c6707 ----------------------- < 70 > 74 --- 6266,6267c6732,6733 ----------------------- < On a creation, Baskets will be distributed to the Authorized < Participants by the Trust in exchange for the delivery to the Trust > On a creation, Baskets will be distributed to the creating Authorized > Participant by the Trust in exchange for the delivery to the Trust --- 6269,6273c6735,6739 ----------------------- < to the value of the Shares being purchased). < On a redemption, the Trust will distribute bitcoin equal in value to < the value of the Shares being redeemed to the redeeming Authorized < Participant in exchange for the delivery to the Trust of one or < more Baskets. > to the NAV multiplied by the number of Shares in the Basket). > On a redemption, the Trust will distribute bitcoin equal in value > to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. --- 6275,6285c6741,6758 ----------------------- < Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value < of the Basket will be equal to the value of 50,000 Shares at their < net asset value per Share on that day). < The Trust will not issue or redeem fractions of a Basket. Only < Authorized Participants will be able to create or redeem Baskets. On < the first day of trading, each Share in the Seed Baskets will be < comprised of 0.10 bitcoin, and each Seed Basket will be made up of < [5,000] bitcoin. Baskets may be created or redeemed only by Authorized < Participants, who may be required to pay a Transaction Fee the Trust < Agency Service Provider for each order to create or redeem Baskets > Transfer Agent in a creation or redemption transaction will be the > same (i.e., each Basket will initially consist of 100,000 Shares and > the value of the Basket will be equal to the value of 100,000 Shares > (or such other amount as determined by the Trust from time to time) > at their net asset value per Share on that day). > The Trust will not issue or redeem fractions of a Basket. The number > of bitcoin required to create a Basket, or to be delivered upon the > redemption of a Basket, will gradually decrease over time, due to > the accrual of the > Trust's expenses, the transfer of the > Trust's bitcoin to pay the Sponsor's Fee, and the transfer of the > Trust's bitcoin to pay any Trust expenses not assumed by the > Sponsor. Only Authorized Participants will be able to create or > redeem Baskets. On the first day of trading, each Share in the Seed > Baskets will be comprised of 0.01 bitcoin, and each Seed Basket will > be made up of 1,000 bitcoin. Baskets may be created or redeemed only > by Authorized Participants, who may be required to pay a Transaction > Fee to the Transfer Agent for each order to create or redeem Baskets --- 6293,6302c6766,6778 ----------------------- < time each Business Day. < The Administrator will calculate the NAV using the Gemini Exchange < Spot Price. < In the event that the Sponsor determines that the Gemini Exchange < Spot Price is not an appropriate basis for evaluation of the < Trust's bitcoin, < the Sponsor will instruct the Administrator to use the spot price of < the itBit bitcoin exchange (the "itBit Exchange") as an alternative < basis for calculating the < Trust's NAV. > Time each Business Day. > The Administrator will calculate the NAV using > the Gemini Exchange Auction Price, which is publicly available and > will be provided to the Administrator by the Sponsor each Business Day. > In the event that the Sponsor determines that > the Gemini Exchange Auction Price is not an appropriate basis for > evaluation of the > Trust's bitcoin on a given Business Day, > the Sponsor will instruct the Administrator to use the 4:00 > p.m. Eastern Time spot price on the Gemini Exchange or the itBit > bitcoin exchange (the "itBit Exchange") as an alternative basis for > calculating the > Trust's NAV on that Business Day. --- 6306,6322c6782,6798 ----------------------- < regulatory oversight of the NYSDFS. Any determination that the Gemini < Exchange Spot Price is unavailable or otherwise not an appropriate < basis for calculating the < Trust's NAV would be based upon extraordinary criteria in which the < operation of Gemini Exchange is disrupted or otherwise experiencing < material calculation or reporting irregularities. If the Sponsor < determines in good faith that neither the Gemini Exchange Spot Price < nor the spot price on the itBit Exchange is reliable for calculating < the < Trust's NAV on a particular Business Day, including but not limited < to situations where it does not reflect material events occurring < between the time of calculation of such Gemini Exchange Spot Price < or the spot price on the itBit Exchange and the time the < Trust's Shares are valued, bitcoin will be valued using fair < market value pricing as determined in good faith by the Sponsor and < calculated by the Administrator under procedures established in the < Trust Servicing Agreement. > regulatory oversight of the NYSDFS. Any determination that > the Gemini Exchange Auction Price is unavailable or otherwise not an > appropriate basis for calculating the > Trust's NAV on a given Business Day would be based upon extraordinary > criteria in which the operation of the Gemini Exchange is disrupted > or otherwise experiencing material calculation or reporting > irregularities. If the Sponsor determines in good faith that none of > the Gemini Exchange Auction Price, the spot price on the Gemini > Exchange, or the spot price on the itBit > Exchange are reliable for calculating the > Trust's NAV on a particular Business Day, including but not limited to > situations where it does not reflect material information or events > occurring between the time of calculation of such prices and the > time the > Trust's Shares are valued, bitcoin will be valued by the Sponsor > using fair market value pricing as determined in good faith by the > Sponsor and calculated by the Administrator. --- 6325,6332c6801,6816 ----------------------- < may differ from the Gemini Exchange Spot Price or the spot price on < the itBit Exchange. < The Sponsor may consider the market price for bitcoin on other Bitcoin < Exchanges, or in other forums for which bitcoin prices are published < publicly. Neither the Administrator nor the Sponsor shall be liable < to any person for the determination that the Gemini Exchange Spot < Price or an alternative basis for a fair market value of bitcoin is < not appropriate as a basis for calculation of the > may differ from > the Gemini Exchange Auction Price or the spot price on the Gemini > Exchange or itBit Exchange. > The Sponsor may consider the market price for > > 75 > > Table of Contents > > bitcoin on other Bitcoin Exchanges, or in other forums for which > bitcoin prices are published publicly. > The Sponsor shall not be liable to any person for the determination > that > the Gemini Exchange Auction Price or an alternative basis for a fair > market value of bitcoin is not appropriate as a basis for calculation > of the --- 6336,6337c6820,6821 ----------------------- < Trust's website as soon as practicable after their calculation by < the Administrator. > Trust's website as soon as practicable after its calculation by the > Administrator. --- 6340,6343d6823 ----------------------- < 71 < < Table of Contents < --- 6360,6366c6840,6845 ----------------------- < hours a day from various financial information service providers < or Bitcoin Network information sites such as BitcoinCharts.com or < bitcoinity.org. Bloomberg financial terminals include pricing data < in USD and in Euro from several Bitcoin Exchanges. Recently, the CME < and the ICE announced bitcoin pricing indices. Current bitcoin market < prices are also generally available with bid/ask spreads directly < from Bitcoin Exchanges. > hours a day from various financial information service providers or > Bitcoin Network information sites. Bloomberg financial terminals > include pricing data in USD and in Euro from several Bitcoin > Exchanges. Recently, the CME and the ICE announced bitcoin pricing > indices. Current bitcoin market prices are also generally available > with bid/ask spreads directly from Bitcoin Exchanges. --- 6368,6375c6847,6855 ----------------------- < Trust's website will provide pricing information for the Gemini < Exchange Spot Price and the Shares. The Gemini Exchange itself < provides comprehensive last trade information as well as the aggregate < quantity available at each price level within its limit order book, < all through its public website (www.gemini.com) and public market < data feeds. Market prices for the Shares will be available from a < variety of sources including brokerage firms, information websites < and other information service providers. > Trust's website will provide pricing information for > the Gemini Exchange Auction Price, the 4:00 p.m. Eastern Time spot > price on the Gemini Exchange, and the Shares. The Gemini Exchange > itself provides comprehensive last trade information as well as the > aggregate quantity available at each price level within its limit > order book, all through its public website and public market data > feeds. Market prices for the Shares will be available from a variety > of sources including brokerage firms, information websites and other > information service providers. --- 6379,6380c6859,6860 ----------------------- < Trust's website as soon as practicable after their calculation by < the Administrator. > Trust's website as soon as practicable after its calculation by the > Administrator. --- 6384c6864 ----------------------- < 72 > 76 --- 6392,6393c6872,6873 ----------------------- < The Sponsor's mailing address is 1007 Orange Street, Nemours Building, < Suite 1463, Wilmington, DE 19801. > The Sponsor's mailing address is 301 N. Market Street, Suite 1463, > Wilmington, DE 19801. --- 6396,6398c6876,6878 ----------------------- < Capital Management, LLC, is not responsible for the debts, obligations < and liabilities of the Sponsor solely by reason of being the sole < member of the Sponsor. > Capital Fund, LLC, is not responsible for the debts, obligations and > liabilities of the Sponsor solely by reason of being the sole member > of the Sponsor. --- 6408c6888 ----------------------- < indemnification amounts) under the Trust Agreement, > indemnification amounts) under the Trust Agreement; --- 6410,6412c6890,6892 ----------------------- < the Trust Servicing Agreement, < (iii) the Trust Agency Service Provider's monthly fee and expenses < under the Trust Agency Service Provider Agreement, > the Administration Agreement; > (iii) the Transfer Agent's monthly fee and expenses under the Transfer > Agency and Services Agreement; --- 6414,6417c6894,6897 ----------------------- < Trust Custody Agreement, < (v) Exchange listing fees, < (vi) SEC registration fees, < (vii) printing and mailing costs, > Trust Custody Agreement; > (v) Exchange listing fees; > (vi) SEC registration fees; > (vii) printing and mailing costs; --- 6419,6424c6899,6902 ----------------------- < Trust's website, < (ix) audit fees, < (x) up to $[ ] per annum in marketing expenses and < (xi) up to $[100,000] per annum in legal expenses. < Any such amounts in excess of $[ ] per annum will be borne by the < Trust as extraordinary expenses. > Trust's website; > (ix) audit fees; > (x) marketing expenses; and > (xi) up to $100,000 per annum in legal expenses. --- 6438,6444c6916,6917 ----------------------- < together with the Sponsor, administer the ongoing analysis of needed < maintenance, repairs or upgrades to the Cold Storage System. < The Sponsor has agreed to pay for the costs, up to $[ ] per annum, < relating to the engagement of an independent audit firm to consult < on and oversee any repairs or upgrades to the Cold Storage System < used by the Custodian and to report to the Sponsor and Custodian at < least annually. > administer the ongoing analysis of needed maintenance, repairs or > upgrades to the Cold Storage System. --- 6446,6447c6919 ----------------------- < While < the Sponsor will not exercise day-to-day oversight over the Trust, > The Sponsor will exercise day-to-day oversight over the Trust, and --- 6450,6464c6922,6925 ----------------------- < The Sponsor may remove the Trustee and appoint a successor trustee < (i) if the Trustee ceases to meet certain objective requirements < (including the requirement that it have capital, surplus and undivided < profits of at least $[ ]), < (ii) if, having received written notice of a material breach of its < obligations under the Trust Agreement, the Trustee has not cured the < breach within thirty (30) days, or < (iii) if the Trustee refuses to consent to the implementation of an < amendment to the < Trust's initial Internal Control Over Financial Reporting. < The Sponsor also has the right to replace the Trustee during the ninety < (90) days following any merger, consolidation or conversion in which < the Trustee is not the surviving entity or, in its discretion, on the < [ ] anniversary of the creation of the Trust or on any subsequent [ < ] anniversary thereafter. > The Sponsor may at any time, upon thirty (30) days' prior notice > to the Trustee, remove the Trustee and appoint a successor trustee > by written instrument delivered to the Trustee and to the successor > trustee appointed. --- 6469,6489c6930,6942 ----------------------- < Administrator, the Trust Agency Service Provider or the Custodian. < The Sponsor may remove the Administrator and/or the Trust Agency < Service Provider and/or the Custodian and appoint a successor < administrator and/or agency service provider and/or custodian if, < having received notice of a material breach of its obligations under < the Trust Servicing Agreement and/or the Trust Agency Service Provider < Agreement and/or the Trust Custody Agreement, respectively, if the < Administrator and/or the Trust Agency Service Provider and /or the < Custodian has not cured the breach within thirty (30) days. < The Sponsor also has the right to replace the Administrator and/or < the Custodian during the < < 73 < < Table of Contents < < ninety (90) days following any merger, consolidation or conversion in < which the Administrator and/or the Trust Agency Service Provider and/or < the Custodian is not the surviving entity, or, in its discretion, on < the [ ] anniversary of the creation of the Trust or on any subsequent < [ ] anniversary thereafter. > Administrator, the Transfer Agent or the Custodian. > The Trust may remove the Administrator and/or the Transfer Agent and/or > the Custodian and appoint a successor administrator and/or transfer > agent and/or custodian if, having received notice of a material > breach of its obligations under the Administration Agreement and/or > the Transfer Agency and Services Agreement and/or the Trust Custody > Agreement, respectively, if the Administrator and/or the Transfer > Agent and/or the Custodian has not taken steps to cure the breach > within a specified time period. > The Administrator, Transfer Agent, and Custodian may terminate their > respective agreements if, having provided notice to the Trust of the > Trust's breach of such agreement, the Trust has not cured the breach > within a specified time period. --- 6492c6945 ----------------------- < (i) develop a marketing plan for the Trust on an ongoing basis, > (i) develop a marketing plan for the Trust on an ongoing basis; --- 6495c6948 ----------------------- < Trust's website and > Trust's website; and --- 6497,6498c6950,6951 ----------------------- < The Sponsor has agreed to assume up to $[ ] per annum in marketing < expenses on behalf of the Trust. > The Sponsor has agreed to assume all marketing expenses on behalf of > the Trust. --- 6504a6958,6962 ----------------------- > > 77 > > Table of Contents > --- 6518,6523c6976 ----------------------- < (ii) a non-exclusive, worldwide, right and license under and to < licensed know-how; < (iii) a non-exclusive, worldwide, right and license to use, modify, < maintain, adapt, translate, improve, and prepare derivative works of, < the licensed software; < (iv) an exclusive license to use the licensed service marks for the > (ii) an exclusive license to use the licensed service marks for the --- 6525c6978 ----------------------- < (v) an exclusive license to use licensed domain name(s) in connection > (iii) an exclusive license to use licensed domain name(s) in connection --- 6529,6541d6981 ----------------------- < Under the License Agreement, the Sponsor is required to pay a monthly < royalty equal to a percent of the net Sponsor Fee received by the < Sponsor during the previous month based on a running royalty rate of < between eight (8) percent and sixteen (16) percent of such net Sponsor < Fees. WIP retains the right, but is not required, to terminate the < license if the Sponsor does not meet a minimum royalty payment of < $300,000 during the prior 12-month period, starting on the third < anniversary of the License Agreement. < The Sponsor has the right to sublicense its rights within the Field < of Use in exchange for an obligation to pay a seventy-five (75) < percent royalty based on revenue and/or any other compensation, < if any, collected from such sub-license. < --- 6545,6549c6985,6986 ----------------------- < performed by the Sponsor, any service provider to the Trust including < the Custodian and the Administrator, or on behalf of the Sponsor < and is authorized under the Trust Agreement and the Trust Custody < Agreement to operate and administer the Cold Storage System for the < purposes of storing and transferring bitcoin. > performed by the Sponsor, any service provider to the Sponsor with > respect to the operation of the Trust, or on behalf of the Sponsor. --- 6566,6572c7003,7004 ----------------------- < information for the principal executive officer, principal financial < officer, principal operating officer, and general counsel of the < Sponsor. < < 74 < < Table of Contents > information for the Chief Executive Officer, Chief Financial Officer, > and Chief Operating Officer of the Sponsor. --- 6575c7007 ----------------------- < 34, has served as Chief Executive Officer of the Sponsor since its > 35, has served as Chief Executive Officer of the Sponsor since its --- 6581,6594c7013,7026 ----------------------- < currency. He is also the Chief Operating Officer of WCM, a private < investment firm he co-founded in 2012 that invests in varied asset < classes with an emphasis on providing seed funding and infrastructure < to early-stage startups. Prior to the formation of WCM, Mr. Winklevoss < was a member of the U.S. Men's National Rowing Team and actively < pursued early stage investment opportunities. Mr. Winklevoss began < participating in the Bitcoin economy through direct investment in < 2012. He has been an angel investor and entrepreneur in emerging < technologies since 2003. In 2004, he graduated from Harvard University < with a Bachelor of Arts in Economics. In 2010, Mr. Winklevoss received < a Masters of Business Administration from the Saïd Business School < at the University of Oxford. Together with his brother Tyler, he < represented the United States at the 2008 Olympic Games in Beijing, < China. > currency. He is also the Chief Operating Officer of Winklevoss Capital > Management, LLC ("WCM"), a private investment firm he co-founded in > 2012 that invests in varied asset classes with an emphasis on providing > seed funding and infrastructure to early-stage startups. Prior to > the formation of WCM, Mr. Winklevoss was a member of the U.S. Men's > National Rowing Team and actively pursued early stage investment > opportunities. Mr. Winklevoss began participating in the Bitcoin > economy through direct investment in 2012. He has been an angel > investor and entrepreneur in emerging technologies since 2003. In > 2004, he graduated from Harvard University with a Bachelor of Arts > in Economics. In 2010, Mr. Winklevoss received a Masters of Business > Administration from the Saïd Business School at the University of > Oxford. Together with his brother Tyler, he represented the United > States at the 2008 Olympic Games in Beijing, China. --- 6596c7028 ----------------------- < Tyler Winklevoss, Chief Financial Officer. Tyler Winklevoss, 34, > Tyler Winklevoss, Chief Financial Officer. Tyler Winklevoss, 35, --- 6616,6617c7048,7053 ----------------------- < Benjamin Small, Chief Operating Officer. Benjamin Small, 35, has < served as Chief Operating Officer of the Sponsor since March, 2016 > 78 > > Table of Contents > > Benjamin Small, Chief Operating Officer. Benjamin Small, Ph.D., 35, > has served as Chief Operating Officer of the Sponsor since March 2016, --- 6631,6648c7067 ----------------------- < David H. Brill, General Counsel. David Brill, 46, has served as < General Counsel of the Sponsor since March, 2016 and advises and < handles all legal matters of the Sponsor for the Trust. Mr. Brill is < General Counsel for Gemini Trust Company, LLC. His prior experiences < includes serving as General Counsel for American Stock Transfer & < Trust Company and Vice President and Principal Legal Counsel for < Thomson Reuters. Mr. Brill is the former President of the Association < of Corporate Counsel New York City Chapter and is currently the Chair < of its Corporate and Securities Committee. In 1991, he graduated from < the University of Michigan with a Bachelor of Arts in History. In < 1996, Mr. Brill received his Juris Doctorate from American University, < Washington College of Law. He is a frequent writer and speaker on law < department management, securities, risk management and social media < issues. Mr. Brill has been interviewed and quoted in the Wall Street < Journal, New York Times, the New York Law Journal and American Lawyer < among others. < < 75 > 79 --- 6656,6658c7075,7076 ----------------------- < The Trustee has its principal office at 2711 Centerville Road, < Wilmington, DE 19808. < The Trustee is subject to supervision by the [ ]. A copy of the Trust > The Trustee has its principal office at Little Falls Centre One, > 2711 Centerville Road, Wilmington, DE 19808. A copy of the Trust --- 6661,6662c7079,7083 ----------------------- < Under the Trust Agreement, the Trustee is required to maintain capital, < surplus and undivided profits of $[ ]. > Under the Trust Agreement, the Trustee is required to, among other > things, maintain capital, surplus and undivided profits of $50,000,000, > be authorized to exercise corporate trust powers under the laws of > the jurisdiction of its organization, and be subject to supervision > or examination by federal or state authorities. --- 6678,6679c7099,7100 ----------------------- < (including fiduciary duties) and liabilities relating thereto to the < Trust or Shareholders, such duties and liabilities will be replaced > (including fiduciary duties) and liabilities relating thereto to > the Trust or Sponsor, such duties and liabilities will be replaced --- 6684c7105 ----------------------- < Trust Agency Service Provider, Custodian or any other entity or person. > Transfer Agent, Custodian or any other entity or person. --- 6686,6696c7107,7109 ----------------------- < Neither the Trustee, either in its capacity as trustee on in its < individual capacity, nor any director, officer or controlling person < of the Trustee is, or has any liability as, the issuer, director, < officer or controlling person of the issuer of the Shares. The < Trustee's liability in connection with the issuance and sale of the < Shares is limited solely to the express obligations of the Trustee < as set forth in the Trust Agreement. < < The Trustee is permitted to resign upon at least ninety (90) days' < notice to the Trust, provided that any such resignation will not be < effective until a successor trustee is appointed by the Sponsor. > The Trustee is permitted to resign upon at least thirty (30) days' > notice to the Sponsor, provided that any such resignation will not > be effective until a successor trustee is appointed by the Sponsor. --- 6698,6703c7111,7118 ----------------------- < Sponsor and the Trust against any expenses it incurs relating to or < arising out of the formation, operation or termination of the Trust, < or the performance of its duties pursuant to the Trust Agreement < except to the extent that such expenses result from gross negligence, < willful misconduct or bad faith of the Trustee. < The Sponsor has the discretion to replace the Trustee. > Trust (as primary obligor) and the Sponsor (as secondary obligor) > against any expenses it incurs relating to or arising out of the > formation, operation or termination of the Trust, or the performance > of its duties pursuant to the Trust Agreement except to the extent > that such expenses result from gross negligence, willful misconduct > or bad faith of the Trustee. > The Sponsor has the discretion to replace the Trustee upon thirty > (30) days' prior written notice to the Trustee. --- 6705,6706c7120 ----------------------- < The Trustee's fees and expenses under the Trust Agreement will be < paid by the Sponsor. > The Trustee's fees and expenses will be paid by the Sponsor. --- 6708c7122 ----------------------- < 76 > 80 --- 6714,6719c7128,7135 ----------------------- < [ ], a [ ], is authorized to serve as the Administrator of the Trust < under the Trust Agreement and pursuant to the terms and provisions < of the Trust Servicing Agreement. < The Administrator has its principal office at [ ], [ ], [ ]. A copy < of the Trust Servicing Agreement is available for inspection at the < Administrator's principal office identified above. > State Street Bank and Trust Company, a trust company organized under > the laws of the Commonwealth of Massachusetts, is authorized to > serve as the Administrator of the Trust under the Trust Agreement and > pursuant to the terms and provisions of the Administration Agreement. > The Administrator has its principal office at Channel Center, One > Iron Street, Boston, MA 02210. A copy of the Administration Agreement > is available for inspection at the Administrator's principal office > identified above. --- 6723,6758c7139,7147 ----------------------- < The Administrator serves the Trust pursuant to appointment by the < Sponsor and is generally responsible for the day-to-day administration < of the Trust, including keeping the < Trust's operational records pursuant to the Trust Servicing Agreement < between the Administrator and Sponsor on behalf of the Trust. < The Administrator's principal responsibilities in its role as < administrator of the Trust include < (i) instructing the Custodian to deposit bitcoin into, or transfer < bitcoin out of, the Authorized Participant Custody Accounts and < the Trust Custody Account to facilitate the creation or redemption < of Baskets, < (ii) instructing the Custodian to transfer to the Sponsor Custody < Account the < Trust's bitcoin as needed to pay the Sponsor's Fee (such distributions < of bitcoin are expected to occur approximately monthly in the ordinary < course), < (iii) calculating the < Trust's net asset value and NAV, < (iv) assisting the Sponsor in receiving and processing orders from < Authorized Participants to create and redeem Baskets and coordinating < the processing of such orders with the Custodian, the Trust Agency < Service Provider and DTC, < (v) transferring to the Trust Expense Account and selling, or causing < to be sold, the < Trust's bitcoin as needed to pay any Trust expenses that are not < assumed by the Sponsor, < (vi) receiving and reviewing reports on the Custodian's custody of < and transactions in the < Trust's bitcoin and < (vii) undertaking all other administrative actions as necessary to < accomplish such purposes. < < The Administrator intends to regularly communicate with the Sponsor to < monitor the overall performance of the Trust, and with the Custodian < by reviewing the reports provided by the Custodian pursuant to the < Trust Agreement. > Pursuant to the Administration Agreement between the Administrator > and the Trust, the Administrator provides fund administration and fund > accounting services with regard to the Trust, including calculating the > Trust's net asset value and NAV, maintaining the > Trust's records, and providing such other administrative services as > are specified in the Administration Agreement. > > The Administrator intends to regularly communicate with the Sponsor > regarding the services it provides with regard to the Trust. --- 6762,6766c7151,7154 ----------------------- < The Administrator will coordinate with the Trust Agency Service < Provider in its role as transfer agent for the Trust, and will assist < and support the Sponsor with the preparation of all periodic reports < and other documents required to be filed with the SEC on behalf of < the Custodian. > The Administrator will coordinate with the Transfer Agent in its role > as transfer agent for the Trust, and will assist and support the > Sponsor with the preparation of certain periodic reports and other > documents required to be filed with the SEC on behalf of the Trust. --- 6768,6769c7156,7157 ----------------------- < The Administrator also serves as the Trust Agency Service Provider. < The Administrator's fees and expenses under the Trust Servicing > The Administrator also serves as the Transfer Agent. > The Administrator's fees and expenses under the Administration --- 6772c7160 ----------------------- < 77 > 81 --- 6776,6786c7164 ----------------------- < THE TRUST AGENCY SERVICE PROVIDER < < [ ], a [ ], is authorized to serve as the Trust Agency Service Provider < of the Trust under the Trust Agreement and pursuant to the terms and < provisions of the Trust Agency Service Provider Agreement. < The Trust Agency Service Provider has its principal office at [ ], < [ ], [ ]. A copy of the Trust Agency Service Provider Agreement is < available for inspection at the Administrator's principal office < identified above. < < The Trust Agency Service Provider's Role > THE TRANSFER AGENT --- 6788,6800c7166,7188 ----------------------- < The Trust Agency Service Provider serves as the transfer agent for < the Trust pursuant to appointment by the Sponsor and the terms of < the Trust Agency Service Provider Agreement. < The Trust Agency Service Provider, among other things, provides < transfer agent services with respect to the creation and redemption < of Baskets by Authorized Participants, the issuance and redemption < of Shares, the payment, if any, of distributions with respect to the < Shares, the recording of the issuance of the Shares and the maintaining < of certain records therewith. < < The Administrator serves as the Trust Agency Service Provider. The < fees and expenses of the Trust Agency Service Provider under the < Trust Agency Service Provider Agreement are paid by the Sponsor. > State Street Bank and Trust Company, a trust company organized under > the laws of the Commonwealth of Massachusetts, is authorized to > serve as the Transfer Agent of the Trust under the Trust Agreement > and pursuant to the terms and provisions of the Transfer Agency and > Services Agreement. The Transfer Agent has its principal office at > Channel Center, One Iron Street, Boston, MA 02210. A copy of the > Transfer Agency and Services Agreement is available for inspection > at the Transfer Agent's principal office identified above. > > The Transfer Agent's Role > > The Transfer Agent serves as the transfer agent for the Trust pursuant > to appointment by the Sponsor and the terms of the Transfer Agency > and Services Agreement. The Transfer Agent, among other things, > provides transfer agent services with respect to the creation and > redemption of Baskets by Authorized Participants, the issuance and > redemption of Shares, the payment, if any, of distributions with > respect to the Shares, the recording of the issuance of the Shares > and the maintaining of certain records therewith. > > The Administrator serves as the Transfer Agent. The fees and expenses > of the Transfer Agent under the Transfer Agency and Services Agreement > are paid by the Sponsor. --- 6802c7190 ----------------------- < 78 > 82 --- 6808,6810c7196,7198 ----------------------- < Gemini Trust Company, LLC, a New York State-chartered limited liability < trust company that operates under the direct supervision and regulatory < authority of the NYSFDS. > Gemini Trust Company, LLC, is a New York State-chartered limited > liability trust company that operates under the direct supervision > and regulatory authority of the NYSDFS. --- 6831,6832c7219,7221 ----------------------- < in accordance with the instructions of the Administrator. If the < Custodian resigns in its capacity as custodian of the > in accordance with the instructions of the Trust, the Sponsor, or > Administrator. If the Custodian resigns in its capacity as custodian > of the --- 6837,6838c7226,7227 ----------------------- < The Custodian's fees and expenses under the Trust Custody will be < paid by the Sponsor. > The Custodian's fees and expenses under the Trust Custody Agreement > will be paid by the Sponsor. --- 6840,6842c7229,7231 ----------------------- < The Custodian and its affiliates may from time to time purchase or < sell bitcoin or the Shares for their own accounts and as agent for < their customers. > Affiliates of the Custodian may from time to time purchase or sell > bitcoin or the Shares for their own accounts and as agent for their > customers. --- 6844c7233 ----------------------- < 79 > 83 --- 6853,6854c7242 ----------------------- < Sponsor and the Administrator, and is subject to acceptance by the < Trust Agency Service Provider. > Sponsor, subject to acceptance by the Transfer Agent. --- 6860c7248,7249 ----------------------- < Participant Agreement. > Participant Agreement with the Sponsor on behalf of the Trust, > subject to the acceptance by the Transfer Agent. --- 6864,6865c7253,7254 ----------------------- < Only Authorized Participants may place orders to create or redeem < one or more Baskets. Authorized Participant Agreements set forth the > Only Authorized Participants may place orders to create or redeem one > or more Baskets. The Authorized Participant Agreements set forth the --- 6869c7258 ----------------------- < 80 > 84 --- 6890,6894c7279,7280 ----------------------- < enterprise with management and a board of directors. A Shareholder will < not have the statutory rights normally associated with the ownership of < shares of a corporation; however, the DSTA does provide Shareholders < the right to bring "oppression" or "derivative" actions. All of the < Shares are of the same class with equal rights and privileges. > enterprise with management and a board of directors. All of the Shares > are of the same class with equal rights and privileges. --- 6897,6900c7283,7285 ----------------------- < Shareholders may vote under the Trust Agreement. The Shares do < not entitle their holders to any conversion or pre-emptive rights < or, except as provided below, any redemption rights or rights to < distributions. > Shareholders may vote under the Trust Agreement. The Shares do not > entitle their holders to any conversion or preemptive rights or, except > as provided below, any redemption rights or rights to distributions. --- 6904,6909c7289,7294 ----------------------- < If the Trust is terminated and liquidated, the Administrator will < distribute to Shareholders any amounts of the cash proceeds of the < liquidation remaining after the satisfaction of all outstanding < liabilities of the Trust and the establishment of reserves for < applicable taxes, other governmental charges and contingent or future < liabilities as the Administrator shall determine. > If the Trust is terminated and liquidated, any amounts of the cash > proceeds of the liquidation remaining after the satisfaction of all > outstanding liabilities of the Trust and the establishment of reserves > for applicable taxes, other governmental charges and contingent or > future liabilities of the Trust shall be distributed to Shareholders > in accordance with the Trust Agreement. --- 6912,6914c7297,7300 ----------------------- < Trust." Shareholders of record on the record date fixed by the Trust < Agency Service Provider for a distribution will be entitled to receive < their pro rata portion of any distribution. > Trust." Shareholders of record on the record date fixed by the > Transfer Agent for a distribution will be entitled to receive the > distribution of the amount of Trust assets (paid in cash) represented > by those Shares. --- 6923,6926d7308 ----------------------- < In addition, certain amendments to the Trust Agreement require advance < notice to Shareholders before the effectiveness of such amendments, < but no Shareholder vote or approval is required for any amendment to < the Trust Agreement. --- 6937,6949c7319,7337 ----------------------- < one or more global certificates will be deposited by the Trust Agency < Service Provider with the DTC and registered in the name of Cede & < Co., as nominee for the DTC. The global certificates will evidence < all of the Shares outstanding at any time. < Under the Trust Agreement, Shareholders are limited to < (i) DTC Participants such as banks, brokers, dealers and trust < companies, < (ii) those who maintain, either directly or indirectly, a custodial < relationship with a DTC Participant ("Indirect Participants"), and < (iii) those banks, brokers, dealers, trust companies and others who < hold interests in the Shares through DTC Participants or Indirect < Participants. < The Shares are only transferable through the book- > one or more global certificates will be deposited by the Transfer > Agent with the DTC and registered in the name of Cede & Co., as nominee > for the DTC. The global certificates will evidence all of the Shares > outstanding at any time > . Authorized Participants will be able to place orders to create or > redeem Baskets > . Authorized Participants must be > (i) registered broker-dealers or other securities market participants, > such as banks and other financial institutions, which are not required > to register as broker-dealers to engage in securities transactions, and > (ii) DTC Participants. To become an Authorized Participant, a person > must enter into an Authorized Participant Agreement with the Sponsor > on behalf of the Trust, subject to acceptance by the Transfer Agent. > The Shares are only transferable through the book-entry system of > the DTC. Shareholders who are not DTC Participants may transfer their > Shares through the DTC by instructing the DTC Participant holding their > Shares (or by instructing the Indirect Participant or other entity > through which their Shares are held) to transfer the Shares. Transfers > will be made in accordance with standard securities industry practice. --- 6951c7339 ----------------------- < 81 > 85 --- 6955,6961d7342 ----------------------- < entry system of the DTC. Shareholders who are not DTC Participants < may transfer their Shares through the DTC by instructing the DTC < Participant holding their Shares (or by instructing the Indirect < Participant or other entity through which their Shares are held) < to transfer the Shares. Transfers will be made in accordance with < standard securities industry practice. < --- 6967,6969c7348,7350 ----------------------- < the Sponsor may direct the Trust Agency Service Provider to declare a < split or reverse split in the number of Shares outstanding and to make < a corresponding change in the number of Shares constituting a Basket. > the Sponsor may direct the Transfer Agent to declare a split or reverse > split in the number of Shares outstanding and to make a corresponding > change in the number of Shares constituting a Basket. --- 6971c7352 ----------------------- < 82 > 86 --- 6998c7379 ----------------------- < of FIPS PUB 140-2 Level 3 (or higher). HSMs (each, a "Signer") are > of FIPS PUB 140-2 Level 3 (or higher).33 HSMs (each, a "Signer") are --- 7005,7008c7386,7388 ----------------------- < multiple-signature ("Multisig") technology with an "M-of-N" signing < design that requires a signature from more than one (1) Signer (but < fewer than the full complement of potential Signers) in order to < move the > multiple-signature ("Multisig") technology with a "2-of-3" signing > design that requires a signature from at least two (2) of three (3) > potential Signers in order to move the --- 7013,7017c7393,7403 ----------------------- < In addition, the operation of a Signer requires the coordinated actions < of multiple employees (each a "Signatory") to protect against insider < malfeasance. Lastly, the Cold Storage System is comprised of hardware < that is sourced from multiple, diverse manufacturers to guard against < supply-chain risks. > In addition, the operation of a Signer requires the coordinated > actions of multiple individuals (each a "Signatory") to protect against > insider malfeasance. All Signatories have undergone background checks > by a third-party vendor and are subject to, with or without the > Signatory's knowledge, ongoing background checks at the discretion > of the Custodian. All Signatories have been fingerprinted, and > all fingerprint cards and accompanying information are retained by > the Custodian for the duration of the Signatory's tenure and for > a minimum of three (3) years thereafter. Lastly, the Cold Storage > System is comprised of hardware that is sourced from multiple, > diverse manufacturers to guard against supply-chain risks. --- 7027,7028c7413,7414 ----------------------- < Trust's assets periodically during audits on-demand and without < necessitating the transfer of any of the > Trust's assets periodically during audits or examinations on-demand > and without necessitating the transfer of any of the --- 7040,7041c7426,7427 ----------------------- < for the maintenance of, and periodic updates to, the Cold Storage < System. > for the establishment and maintenance of, and periodic updates to, > the Cold Storage System. --- 7053a7440,7447 ----------------------- > 33 > > See "Business of the Trust" above. > > 87 > > Table of Contents > --- 7056,7065c7450,7459 ----------------------- < For example, the Sponsor must engage an independent audit firm to < periodically audit the Custodian's Cold Storage System protocols < and internal controls ("Internal Controls Audit"), and report to the < Sponsor at least annually on such matters. < Additionally, the Sponsor must engage an independent audit firm to < biannually verify that the Custodian can demonstrate "proof of control" < of the private keys that control the < Trust's bitcoin ("Proof of Control Audit"). One Proof of Control < Audit will be conducted at the end of each calendar year and the < other at random. > For example, the Custodian will engage an independent auditor to audit > the Custodian's Cold Storage System protocols and internal controls > ("Internal Controls Audit"). > Additionally, the Sponsor and the Custodian have engaged an independent > auditor to examine and attest that the Custodian can demonstrate > "proof of control" of the private keys that control the > Trust's bitcoin ("Proof of Control Examination") on a monthly > basis. The results of each monthly Proof of Control Examination will > be made available on the > Trust's website. --- 7067c7461 ----------------------- < 83 > 88 --- 7075,7078c7469,7475 ----------------------- < provisions of the Trust Documents. The following is a description < of the material terms of the Trust Documents as they relate to the < creation and redemption of the < Trust's Shares. > provisions of the Trust Documents, Authorized Participant Agreements > and this Registration Statement as they may be amended from time to > time. The following is a description of the material terms of the > Trust Documents and Authorized Participant Agreements as they relate > to the creation and redemption of the > Trust's Shares as of the date of this Registration Statement (and > which may change over time). --- 7085,7086c7482,7483 ----------------------- < On a creation, Baskets will be distributed to the Authorized < Participants by the Trust in exchange for the delivery to the Trust > On a creation, Baskets will be distributed to the creating Authorized > Participant by the Trust in exchange for the delivery to the Trust --- 7088,7092c7485,7489 ----------------------- < to the value of the Shares being purchased). < On a redemption, the Trust will distribute bitcoin equal in value to < the value of the Shares being redeemed to the redeeming Authorized < Participant in exchange for the delivery to the Trust of one or < more Baskets. > to the NAV multiplied by the number of Shares in the Basket). > On a redemption, the Trust will distribute bitcoin equal in value > to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. --- 7094,7100c7491,7504 ----------------------- < Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value < of the Basket will be equal to the value of 50,000 Shares at their < net asset value per Share on that day). < The Trust will not issue or redeem fractions of a Basket. Only < Authorized Participants will be able to place orders to create or < redeem Baskets > Transfer Agent in a creation or redemption transaction will be the > same (i.e., each Basket will initially consist of 100,000 Shares and > the value of the Basket will be equal to the value of 100,000 Shares > (or such other amount as determined by the Trust from time to time) > at their net asset value per Share on that day). > The Trust will not issue or redeem fractions of a Basket. The number > of bitcoin required to create a Basket, or to be delivered upon the > redemption of a Basket, will gradually decrease over time, due to > the accrual of the > Trust's expenses, the transfer of the > Trust's bitcoin to pay the Sponsor's Fee, and the transfer of the > Trust's bitcoin to pay any Trust expenses not assumed by the > Sponsor. Only Authorized Participants will be able to place orders > to create or redeem Baskets --- 7105,7116c7509,7519 ----------------------- < (ii) DTC Participants. To become an Authorized Participant, a < person must enter into an Authorized Participant Agreement with < the Administrator and the Sponsor on behalf of the Trust, subject to < acceptance by the Trust Agency Service Provider. Authorized Participant < Agreements provide the procedures for the creation and redemption < of Baskets as well as the amount of bitcoin required for delivery < or distribution for such creations and redemptions. An Authorized < Participant Agreement and the related procedures attached thereto may < be amended by Administrator and the Sponsor without the consent of < any Shareholder or Authorized Participant. A Transaction Fee may be < imposed to offset the transfer and other transaction costs associated < with creation or redemption > (ii) DTC Participants. To become an Authorized Participant, > a person must enter into an Authorized Participant Agreement > with the Sponsor on behalf of the Trust, subject to acceptance by > the Transfer Agent. Authorized Participant Agreements provide the > procedures for the creation and redemption of Baskets as well as the > quantity of bitcoin required for delivery or distribution for such > creations and redemptions. An Authorized Participant Agreement and > the related procedures attached thereto may be amended by the Trust > and the Sponsor without the consent of any Shareholder or Authorized > Participant. A Transaction Fee may be imposed to offset the transfer > and other transaction costs associated with creation or redemption --- 7146,7151c7549 ----------------------- < jurisdictions where the nature of its business so requires. Certain < Authorized Participants will be regulated under federal and state < banking laws and regulations. < Each Authorized Participant will have its own set of rules and < procedures, internal controls and information barriers as it determines < is appropriate in light of its own regulatory regime. > jurisdictions --- 7153c7551 ----------------------- < 84 > 89 --- 7157,7163c7555,7570 ----------------------- < Authorized Participants may act for their own accounts or as < agents for broker-dealers, custodians and other securities market < participants that wish to create or redeem Baskets. An order for < one or more Baskets may be placed by an Authorized Participant < on behalf of multiple clients. As of the date of this prospectus, < [ ] have each signed an Authorized Participant Agreement with the < Trust and, upon the effectiveness of such agreement, may create and > where the nature of its business so requires. Certain Authorized > Participants will be regulated under federal and state banking laws > and regulations. > Each Authorized Participant will have its own set of rules and > procedures, internal controls and information barriers as it determines > is appropriate in light of its own regulatory regime. > > Authorized Participants may act for their own accounts or as agents > for broker-dealers, custodians and other securities market participants > that wish to create or redeem Baskets. An order for one or more Baskets > may be placed by an Authorized Participant on behalf of multiple > clients. As of the date of this registration statement, Convergex > Execution Solutions LLC, KCG Americas LLC, and Virtu Financial BD LLC > (collectively, the "Current APs") have each signed an Authorized > Participant Agreement with the Trust and, upon the effectiveness > of such agreement and the Registration Statement, may create and --- 7166c7573 ----------------------- < Administrator to obtain the contact information for the Authorized > Transfer Agent to obtain the contact information for the Authorized --- 7175a7583,7584 ----------------------- > Each of the Current APs has established a custody account with the > Custodian to facilitate bitcoin transactions with the Trust. --- 7183,7186c7592,7595 ----------------------- < to the relevant provisions of the Trust Agreement, the Trust Servicing < Agreement and the form of Authorized Participant Agreements for more < detail, each of which is attached as an exhibit to the registration < statement of which this prospectus is a part. > to the relevant provisions of the Trust Agreement, the Transfer > Agency and Service Agreement and the form of Authorized Participant > Agreements for more detail, each of which is attached as an exhibit > to the registration statement of which this prospectus is a part. --- 7193c7602 ----------------------- < the Administrator to create one or more Baskets (each a "Creation > the Transfer Agent to create one or more Baskets (each a "Creation --- 7197c7606 ----------------------- < is open for regular trading. > is open for regular trading (each a "Business Day"). --- 7201,7204c7610,7614 ----------------------- < The number of bitcoin required to be delivered to the Trust in exchange < for a Creation Basket is determined by the Trust Agreement. All < questions as to the amount of bitcoin necessary to deliver to purchase < a Creation Basket will be conclusively determined by the Administrator. > The quantity of bitcoin required to be delivered to the Trust > in exchange for a Creation Basket is determined by the Trust > Agreement. All questions as to the quantity of bitcoin necessary to > deliver to purchase a Creation Basket will be conclusively determined > by the Administrator. --- 7211c7621 ----------------------- < the Administrator is responsible for delivering the bitcoin to the > the Transfer Agent is responsible for delivering the bitcoin to the --- 7226,7234c7636 ----------------------- < Following confirmation of the receipt of bitcoin into the Trust < Custody Account by the Custodian, the Administrator will direct the < DTC to credit the Authorized Participant's DTC account with the Shares < representing the number of Creation Baskets purchased. The expense < and risk of delivery, ownership and safekeeping of a bitcoin delivery < until it has been received by the Trust in the Trust Custody Account < shall be borne solely by the Authorized Participant. < < 85 > 90 --- 7237a7640,7647 ----------------------- > Following confirmation of the receipt of bitcoin into the Trust > Custody Account by the Custodian, the Transfer Agent will direct > the DTC to credit the Authorized Participant's DTC account with the > Shares representing the number of Creation Baskets purchased. The > expense and risk of delivery, ownership and safekeeping of a bitcoin > delivery until it has been received by the Trust in the Trust Custody > Account shall be borne by the Trust. > --- 7250,7251c7660 ----------------------- < The Administrator may, in its discretion, and when directed by < the Sponsor, suspend the right to place Creation Basket orders, > The Sponsor may suspend the right to place Creation Basket orders, --- 7255c7664 ----------------------- < restricted or > restricted; or --- 7258,7266c7667,7675 ----------------------- < practicable or presents, in the judgment of the Administrator, the < Custodian or the Sponsor or their agents, a security risk to the Cold < Storage System. The inability of the Custodian to operate the Cold < Storage System because of a failure of hardware, software or personnel < or an inability to access the Cold Storage System (e.g., because of < power failure or acts of God) are examples of such emergencies. None < of the Administrator, the Custodian, the Sponsor, or their agents < will be liable to any person or in any way for any loss or damages < that may result from any such suspension or postponement. > practicable or presents, in the judgment of the Custodian or > the Sponsor or their agents, a security risk to the Cold Storage > System. The inability of the Custodian to operate the Cold Storage > System because of a failure of hardware, software or personnel > or an inability to access the Cold Storage System (e.g., because > of power failure, terrorism, or acts of God) are examples of such > emergencies. None of the Custodian, the Sponsor, or their agents will > be liable to any person or in any way for any loss or damages that > may result from any such suspension or postponement. --- 7268c7677 ----------------------- < The Administrator may also reject a Creation Basket order if > The Sponsor may also reject a Creation Basket order if --- 7270,7278c7679,7690 ----------------------- < Authorized Participant Agreements, < (ii) such order is incorrect, < (iii) if the Creation Basket Order presents, in the opinion of the < Administrator, the Custodian, the Sponsor or their agents, a security < risk to the Cold Storage System, or < (iv) the fulfillment of the Creation Basket order, in the opinion < of counsel, might be unlawful. None of the Trustee, Administrator, < Trust Agency Service Provider, Custodian, Sponsor, or their agents < will be liable for the rejection of any Creation Basket order. > Authorized Participant Agreements; > (ii) such order is incorrect; > (iii) the Creation Basket Order presents, in the opinion of the > Custodian, the Sponsor or their agents, a security risk to the Cold > Storage System; > (iv) the fulfillment of the Creation Basket order, in the opinion of > counsel, might be unlawful; or > (v) circumstances outside the control of the Sponsor, the Transfer > Agent or the Custodian, as applicable, make it, for all practical > purposes, not feasible to process the Creation Basket Order. None of > the Custodian, the Sponsor, the Transfer Agent, nor their agents will > be liable for the rejection of any Creation Basket order. --- 7282,7287c7694,7699 ----------------------- < The procedures by which an Authorized Participant can redeem < one or more Baskets (each a "Redemption Basket") will mirror the < procedures for the creation of Baskets. On any Business Day, an < Authorized Participant may place a Redemption Basket order with the < Administrator. The settlement of Redemption Baskets orders, including < the delivery of Shares to the Trust and distribution of bitcoin to the > The procedures by which an Authorized Participant can redeem one or > more Baskets (each a "Redemption Basket") will mirror the procedures > for the creation of Baskets. On any Business Day, an Authorized > Participant may place a Redemption Basket order with the Transfer > Agent. The settlement of Redemption Baskets orders, including the > delivery of Shares to the Trust and distribution of bitcoin to the --- 7289,7303c7701,7713 ----------------------- < trading. Settlement of Redemption Baskets orders may be delayed longer < than three (3), but no more than five (5), Business Days following the < Redemption Basket order date. Settlement of Redemption Baskets may be < delayed only in the instance of administrative or custodial delays in < the processing of a distribution of bitcoin from the Trust Custody < Account, whether by reason of Bitcoin Network delays, mechanical or < clerical error or by act of God. Settlement of a Redemption Basket < will occur only on Business Days. Redemption Basket orders must be < placed no later than 4:00 p.m. Eastern time on a Business Day. A < Redemption Basket order so received will be effective on the date < it is received if the Administrator finds it to be in satisfactory < form. The redemption procedures allow only Authorized Participants < to place Redemption Basket orders and do not entitle an Authorized < Participant to receive a distribution of bitcoin in an amount that < is different than the value of a Redemption Basket. > trading. Settlement of Redemption Baskets may be delayed only in the > instance of administrative or custodial delays in the processing of > a distribution of bitcoin from the Trust Custody Account, whether > by reason of Bitcoin Network delays, mechanical or clerical error > or by act of God. Settlement of a Redemption Basket will occur only > on Business Days. Redemption Basket orders must be placed no later > than 3:00 p.m. Eastern Time on a Business Day. A Redemption Basket > order so received will be effective on the date it is received if > the Sponsor finds it to be in satisfactory form. The redemption > procedures allow only Authorized Participants to place Redemption > Basket orders and do not entitle an Authorized Participant to receive > a distribution of bitcoin in a quantity that is different than the > value of a Redemption Basket. --- 7307,7308c7717,7718 ----------------------- < book-entry system to the Administrator's DTC account not later than < the third Business Day following the effective date of the Redemption > book-entry system to the Transfer Agent's DTC account not later than > the next Business Day following the effective date of the Redemption --- 7310a7721,7724 ----------------------- > 91 > > Table of Contents > --- 7320,7323d7733 ----------------------- < 86 < < Table of Contents < --- 7327,7329c7737,7739 ----------------------- < transferred to the Authorized Participant on the third Business Day < following the Redemption Basket order date if, by 9:00 a.m. Eastern < time on such third Business Day, the Administrator's DTC account has > transferred to the Authorized Participant on the next Business Day > following the Redemption Basket order date if, by 3:00 p.m. Eastern > Time on such next Business Day, the Transfer Agent's DTC account has --- 7331,7345c7741,7754 ----------------------- < the Administrator will instruct the Custodian to transfer bitcoin from < the Trust Custody Account and distribute it to the redeeming Authorized < Participant. If the Administrator's DTC account has not been credited < with all of the Shares representative of the Redemption Baskets to < be redeemed by such time, the delivery will be considered unfulfilled. < The Administrator is also authorized to instruct the Custodian to < transfer to the Authorized Participant the distribution of bitcoin < resulting from the Redemption Basket order, notwithstanding that < the Redemption Baskets to be redeemed are not credited to the < Administrator's DTC account by 9:00 a.m. Eastern time on the third < Business Day following the Redemption Basket order date, if the < Authorized Participant has collateralized its obligation to deliver < the Redemption Baskets through DTC's book-entry system on such terms < as the Sponsor and < the Administrator may from time to time agree upon. > the Transfer Agent will instruct the Custodian to transfer bitcoin > from the Trust Custody Account and distribute it to the redeeming > Authorized Participant. If the Transfer Agent's DTC account has > not been credited with all of the Shares representative of the > Redemption Baskets to be redeemed by such time, the delivery will > be considered unfulfilled. The Transfer Agent is also authorized to > instruct the Custodian to transfer to the Authorized Participant the > distribution of bitcoin resulting from the Redemption Basket order, > notwithstanding that the Redemption Baskets to be redeemed are not > credited to the Transfer Agent's DTC account by the appropriate time, > if the Authorized Participant has collateralized its obligation to > deliver the Redemption Baskets through DTC's book-entry system on > such terms as the Sponsor and the Transfer Agent may from time to > time agree upon. --- 7350c7759 ----------------------- < instruct the Custodian to distribute that amount of bitcoin to the > instruct the Custodian to distribute that quantity of bitcoin to the --- 7355,7357c7764,7766 ----------------------- < The Administrator may, in its discretion, and will, when directed < by the Sponsor, suspend the right to place Redemption Basket orders, < or postpone the Redemption Basket order settlement date, > The Sponsor, the Administrator, or the Transfer Agent may suspend the > right to place Redemption Basket orders, or postpone the Redemption > Basket order settlement date, --- 7361,7376c7770,7785 ----------------------- < (ii) for any period during which an emergency exists as a result of < which the distribution or evaluation of bitcoin is not reasonably < practicable or presents, in the judgment of Administrator, the < Custodian, the Sponsor, or their agents, a security risk to the Cold < Storage System. The inability of the Custodian to operate the Cold < Storage System because of a failure of hardware, software or personnel < or an inability to access the Cold Storage System (e.g., because of < power failure or acts of God) are examples of such emergencies. None < of the Administrator, the Custodian, the Sponsor, or their agents < will be liable to any person or in any way for any loss or damages < that may result from any such suspension or postponement. < < The Administrator will reject a Redemption Basket order if the order < is not in proper form as described in the Authorized Participant < Agreement or if the fulfillment of the Redemption Basket order, < in the opinion of its counsel, might be unlawful. > (ii) for any period during which an emergency exists as a result > of which the distribution or evaluation of bitcoin is not reasonably > practicable or presents, in the judgment of the Custodian, the Sponsor, > or their agents, a security risk to the Cold Storage System. The > inability of the Custodian to operate the Cold Storage System because > of a failure of hardware, software or personnel or an inability > to access the Cold Storage System (e.g., because of power failure, > terrorism, or acts of God) are examples of such emergencies. None of > the Custodian, the Sponsor, or their agents will be liable to any > person or in any way for any loss or damages that may result from > any such suspension or postponement. > > The Sponsor will reject a Redemption Basket order if, among other > things, the order is not in proper form as described in the Authorized > Participant Agreement or if the fulfillment of the Redemption Basket > order, in the opinion of its counsel, might be unlawful. --- 7380,7388c7789,7802 ----------------------- < To defray the costs incurred by the Trust Agency Service Provider < for services in processing the creation and redemption of Baskets < and transferring bitcoin, including the payment of any transaction < fees to miners, an Authorized Participant may be required to pay to < the Trust Agency Service Provider a Transaction Fee. < The Trust Agency Service Provider shall promptly notify the DTC of < any agreement to include or change the Transaction Fee and will not < implement any increase in the Transaction Fee for the redemption of < Baskets until thirty (30) days after the date of the notice. > To defray the costs incurred by the Transfer Agent for services in > processing the creation and redemption of Baskets and transferring > bitcoin, including the payment of any transaction fees to miners, an > Authorized Participant may be required to pay to the Transfer Agent > a Transaction Fee. The Transfer Agent shall promptly notify the DTC > of any agreement to include or change the Transaction Fee and will > not implement any increase in the Transaction Fee for the redemption > of Baskets until thirty (30) days after the date of the notice. The > Initial Purchaser will not be subject to a Transaction Fee for the > purchase of the Seed Baskets. > > 92 > > Table of Contents --- 7401c7815 ----------------------- < 87 > 93 --- 7413,7426c7827,7846 ----------------------- < On each Business Day, the Administrator will calculate the NAV of the < Trust as measured at 4:00 p.m. Eastern time (the "Evaluation Time") < using the Gemini Exchange Spot Price on each Business Day. The NAV of < the Trust is the asset value of the Trust less its liabilities (which < include accrued but unpaid fees and expenses) divided by the number < of outstanding Shares as of 4:00 p.m. Eastern time each Business Day. < < Any determination that the Gemini Exchange Spot Price is unavailable < or otherwise not an appropriate basis for calculating the < Trust's NAV would be based upon extraordinary criteria in which the < operation of Gemini Exchange is disrupted or otherwise experiencing < material calculation or reporting irregularities. An example of a < situation in which the Gemini Exchange Spot Price may be deemed to < not fairly represent the fair market value of the > On each Business Day, the Administrator will calculate the NAV of > the Trust as measured at 4:00 p.m. Eastern Time (the "Evaluation > Time") using > the Gemini Exchange Auction Price on each Business Day. > The Sponsor will provide > the Gemini Exchange Auction Price, which is publicly available, to > the Administrator each day. The NAV of the Trust is the asset value > of the Trust less its liabilities (which include accrued but unpaid > fees and expenses) divided by the number of outstanding Shares as of > 4:00 p.m. Eastern Time each Business Day. > > Any determination that > the Gemini Exchange Auction Price is unavailable or otherwise not an > appropriate basis for calculating the > Trust's NAV on a given Business Day would be based upon extraordinary > criteria in which the operation of the Gemini Exchange is disrupted > or otherwise experiencing material calculation or reporting > irregularities. An example of a situation in which > the Gemini Exchange Auction Price may be deemed to not fairly represent > the fair market value of the --- 7431,7454c7851,7882 ----------------------- < (ii) daily volume weighted average trading price ("VWAP") that varies < by more than one (1) standard deviation from VWAP of other U.S.-based < Bitcoin Exchanges that are both (a) not the Gemini Exchange and (b) < not undergoing trading irregularities or trading shutdowns. < In the event that the Sponsor determines that the Gemini Exchange < Spot Price is not an appropriate basis for evaluation of the < Trust's bitcoin, < the Sponsor will instruct the Administrator to use the spot price of < the itBit Exchange as an alternative basis for calculating the < Trust's NAV. < The itBit Exchange is operated by the itBit Trust Company, LLC, < a New York State-chartered limited liability trust company that, < like the Gemini Exchange, operates under the direct supervision and < regulatory oversight of the NYSDFS. If the Sponsor determines in good < faith that neither the Gemini Exchange Spot Price nor the spot price < on the itBit Exchange is reliable for calculating the < Trust's NAV on a particular Business Day, including but not limited < to situations where it does not reflect material events occurring < between the time of calculation of such Gemini Exchange Spot Price < or the spot price on the itBit Exchange and the time the < Trust's Shares are valued, bitcoin will be valued using fair < market value pricing as determined in good faith by the Sponsor and < calculated by the Administrator under procedures established in the < Trust Servicing Agreement. > (ii) daily volume weighted average trading price ("VWAP") that > varies by more than one (1) standard deviation from the VWAP of other > U.S.-based Bitcoin Exchanges that are both (a) not the Gemini Exchange > and (b) not undergoing trading irregularities or trading shutdowns. > In the event that the Sponsor determines that > the Gemini Exchange Auction Price is not an appropriate basis for > evaluation of the > Trust's bitcoin on a given Business Day, > the Sponsor will instruct the Administrator to use the 4:00 > p.m. Eastern Time spot price of the Gemini Exchange or itBit Exchange34 > as an alternative basis for calculating the > Trust's NAV on that Business Day (an "Alternate Price"). An example of > a situation in which the Alternate Price may be deemed to not fairly > represent the fair market value of the > Trust's bitcoin would be if operational or trading problems with an > exchange result in both > (i) trading shutdowns or reductions in volume to less than twenty (20) > percent of the prior week's average daily volume on that exchange and > (ii) daily VWAP on that exchange that varies by more than one (1) > standard deviation from the VWAP of other U.S.-based Bitcoin Exchanges > that are both (a) not the exchange and (b) not undergoing trading > irregularities or trading shutdowns. If the Sponsor determines in > good faith that neither > the Gemini Exchange Auction Price nor an Alternate Price are reliable > for calculating the > Trust's NAV on a particular Business Day, including but not limited to > situations where it does not reflect material information or events > occurring between the time of calculation of such prices and the > time the > Trust's Shares are valued, bitcoin will be valued by the Sponsor > using fair market value pricing as determined in good faith by the > Sponsor and calculated by the Administrator. --- 7457,7464c7885,7901 ----------------------- < may differ from the Gemini Exchange Spot Price or the spot price on < the itBit Exchange. < The Sponsor may consider the market price for bitcoin on other Bitcoin < Exchanges, or in other forums for which bitcoin prices are published < publicly. Neither the Administrator nor the Sponsor shall be liable < to any person for the determination that the Gemini Exchange Spot < Price or an alternative basis for a fair market value of bitcoin is < not appropriate as a basis for calculation of the > may differ from > the Gemini Exchange Auction Price or the spot price on the Gemini > Exchange or the itBit Exchange. Factors > the Sponsor may consider include the market price for bitcoin on other > Bitcoin Exchanges, or in other forums for which bitcoin prices are > published publicly, recent significant transactions on the Blockchain > where the USD-bitcoin exchange rate can be readily ascertained (e.g., > sales of items with widely available USD prices where the cost in > bitcoin can be readily determined), movements in the price of other > Digital Assets or fiat currencies, movements in the price of other > Digital Asset ETPs, global or regional political, economic or financial > events, and other factors determined by the Sponsor in good faith. > The Sponsor shall not be liable to any person for the determination > that > the Gemini Exchange Auction Price, Alternate Price, or an alternative > basis for a fair market value of bitcoin is not appropriate as a > basis for calculation of the --- 7466a7904,7914 ----------------------- > 34 > > The itBit Exchange is operated by the itBit Trust Company, LLC, > a New York State-chartered limited liability trust company that, > like the Gemini Exchange, operates under the direct supervision and > regulatory oversight of the NYSDFS. > > 94 > > Table of Contents > --- 7469,7470c7917,7918 ----------------------- < Trust's website as soon as practicable after their calculation by < the Administrator. > Trust's website as soon as practicable after its calculation by the > Administrator. --- 7473,7474c7921,7923 ----------------------- < bitcoin other than the Gemini Exchange Spot Price for such Business < Day, the publication on the > bitcoin other than > the Gemini Exchange Auction Price for such Business Day, the > publication on the --- 7481c7930 ----------------------- < Trust Servicing Agreement will be required by reason of any difference > Administration Agreement will be required by reason of any difference --- 7490c7939 ----------------------- < contained in, information reasonably available to it. > contained in information reasonably available to it. --- 7494,7495c7943,7944 ----------------------- < Administrator against any liability resulting from gross negligence, < willful misconduct or bad faith in the performance of its duties. > Administrator against any liability resulting from fraud, negligence, > or willful misconduct in the performance of its duties. --- 7497c7946 ----------------------- < 88 > 95 --- 7505,7506c7954 ----------------------- < Under the terms of the Agreement, < the Sponsor has agreed to assume the following administrative and > The Sponsor has agreed to assume the following administrative and --- 7509c7957 ----------------------- < amounts) reimbursable under the Trust Agreement, > amounts) reimbursable under the Trust Agreement; --- 7511,7513c7959,7961 ----------------------- < the Trust Servicing Agreement, < (iii) the Trust Agency Service Provider's monthly fee and expenses < under the Trust Agency Service Provider Agreement and > the Administration Agreement; > (iii) the Transfer Agent's monthly fee and expenses under the Transfer > Agency and Services Agreement; and --- 7517,7519c7965,7967 ----------------------- < (i) exchange listing fees, < (ii) SEC registration fees, < (iii) printing and mailing costs, > (i) exchange listing fees; > (ii) SEC registration fees; > (iii) printing and mailing costs; --- 7521,7524c7969,7972 ----------------------- < Trust's website, < (v) audit fees, < (vi) up to $[ ] per annum in marketing expenses and < (vii) up to $[100,000] per annum in legal expenses. > Trust's website; > (v) audit fees; > (vi) marketing expenses; and > (vii) up to $100,000 per annum in legal expenses. --- 7532,7537c7980,7986 ----------------------- < If at any time, other expenses are incurred outside the daily business < of the Trust and the Sponsor's Fee (e.g., expenses relating to < litigation), the Administrator will at the discretion of the Sponsor < or in its own discretion instruct the Custodian to transfer to the < Trust Expense Account the < Trust's bitcoin for later sale as necessary to pay such expenses. > If at any time, other expenses are incurred outside the daily > business of the Trust and the Sponsor's Fee (e.g., expenses relating > to litigation), > the Sponsor will instruct the Custodian to transfer to the Trust > Expense Account a quantity of the > Trust's bitcoin determined by the Administrator for later sale as > necessary to pay such expenses. --- 7545,7547c7994,7995 ----------------------- < The Administrator will, when directed by the Sponsor or in its own < discretion, instruct the Custodian to sell, or otherwise cause the < sale of that number of bitcoin as may be necessary to pay the > The Sponsor will instruct the Custodian to sell, or otherwise cause > the sale of that quantity of bitcoin as may be necessary to pay the --- 7550,7577c7998,8011 ----------------------- < The Administrator will instruct the Custodian to transfer bitcoin < from the Trust Custody Account to the Trust Expense Account. < The Trust Expense Account is an account of the Administrator and any < transfer thereto shall be held in order to pay such extraordinary < expenses. If the Administrator causes the sale of bitcoin in the < Trust Expense Account, any cash received by the Administrator pending < payment of the < Trust's expenses will not bear any interest. < The Administrator will use the cash proceeds of any sales to pay the < outstanding extraordinary expenses of the Trust. < To the extent the Administrator ceases the transfers to the Trust < Expense Account of bitcoin in excess of the amount needed to pay the < Trust's extraordinary expenses, the Administrator will promptly return < such remaining bitcoin by transfer to the Trust Custody Account. < < The Administrator will cause bitcoin to be sold through dealers or by < the Custodian or Administrator directly on a Bitcoin Exchange (which < may include the Gemini Exchange), as directed by the Sponsor or, in < the absence of such direction, with dealers or on Bitcoin Exchanges < through which the Administrator may reasonably expect to obtain a < favorable price and good execution of orders. < The Administrator may consider the market price (relative to the < value of a bitcoin as represented by the Gemini Exchange Spot Price) < expected to be obtained by such dealer or through such Bitcoin Exchange < and the ability of the dealer or Bitcoin Exchange to conduct the sale < of bitcoin with a minimal impact on the market price of bitcoin. < The Administrator may offset the importance of one factor against < the remaining factors. > The Sponsor will instruct the Custodian to transfer bitcoin from the > Trust Custody Account to the Trust Expense Account. > > The Sponsor will cause bitcoin to be sold through dealers or by the > Custodian or Sponsor directly on a Bitcoin Exchange (which may include > the Gemini Exchange). > The Sponsor may consider the market price (relative to the value of > a bitcoin as represented by > the Gemini Exchange Auction Price) expected to be obtained by such > dealer or through such Bitcoin Exchange and the ability of the dealer > or Bitcoin Exchange to conduct the sale of bitcoin with a minimal > impact on the market price of bitcoin. > The Sponsor may offset the importance of one factor against the > remaining factors. --- 7579,7583c8013,8019 ----------------------- < sale transaction is made at the next Gemini Exchange Spot Price or < such other publicly available price that the Sponsor deems fair and < reasonable with respect to the Trust, in each case as set following < the sale order. Neither the Administrator nor the Sponsor is liable < for depreciation or loss incurred by reason of any sale. > transaction is the result of a separate arm's-length transaction and > the sale transaction is made at > the Gemini Exchange Auction Price or such other publicly available > price that the Sponsor in good faith deems fair and reasonable > with respect to the Trust, in each case as set following the sale > order. Neither the Sponsor nor the Administrator is liable for > depreciation or loss incurred by reason of any sale. --- 7588c8024,8031 ----------------------- < 89 > The Sponsor will cause the Custodian to transfer bitcoin from the Trust > Custody Account into the Trust Expense Account for sale by the Sponsor > or the Custodian if a sale is required by applicable law or regulation. > The Sponsor or Custodian will sell the bitcoin in the Trust Custody > Account in connection with the termination and liquidation of the > Trust. > > 96 --- 7592,7612c8035,8044 ----------------------- < The Administrator will also cause the Custodian to transfer bitcoin < from the Trust Custody Account into the Trust Expense Account and < sell the < Trust's bitcoin if the Sponsor notifies the Administrator that sale < is required by applicable law or regulation. < In addition, the Administrator will, if directed by the Sponsor, < sell the bitcoin in the Trust Custody Account in connection with the < termination and liquidation of the Trust. < The Administrator will not be liable or responsible in any way for < depreciation or loss incurred by reason of any sale of bitcoin directed < by the Sponsor. < < The Administrator will not cause the sale of bitcoin to pay the < Sponsor's Fee, which is an ordinary expense of the Trust. < The Sponsor's Fee will be paid through the transfer of bitcoin from < the Trust Custody Account to the Sponsor Custody Account. < < THE TRUST MAY TRANSACT IN BITCOIN ON A LIMITED NUMBER OF EXCHANGES, < WHICH MAY RESULT IN LESS FAVORABLE PRICES AND DECREASED LIQUIDITY < FOR THE TRUST AND THEREFORE COULD HAVE AN ADVERSE EFFECT ON THE TRUST < AND SHAREHOLDERS. > The Sponsor will not cause the sale of bitcoin to pay the Sponsor's > Fee, which is an ordinary expense of the Trust. > The Sponsor's Fee will be paid through the transfer of the appropriate > quantity of bitcoin from the Trust Custody Account to the Sponsor > Custody Account. > > THE TRUST MAY TRANSACT IN BITCOIN ON A LIMITED NUMBER OF BITCOIN > EXCHANGES, INCLUDING THE GEMINI EXCHANGE, WHICH MAY RESULT IN LESS > FAVORABLE PRICES AND DECREASED LIQUIDITY FOR THE TRUST AND THEREFORE > COULD HAVE AN ADVERSE EFFECT ON THE TRUST AND SHAREHOLDERS. --- 7614c8046 ----------------------- < 90 > 97 --- 7649,7656c8081,8088 ----------------------- < one or more global certificates will be signed by the Trust Agency < Service Provider on behalf of the Trust, registered in the name of Cede < & Co., as nominee for DTC, and deposited with the Trust Agency Service < Provider on behalf of DTC. The global certificates will evidence all of < the Shares outstanding at any time. The representations, undertakings < and agreements made on the part of the Trust in the global certificates < are made and intended for the purpose of binding only the Trust and < not the Trust Agency Service Provider or the Sponsor individually. > one or more global certificates will be signed by the Transfer Agent on > behalf of the Trust, registered in the name of Cede & Co., as nominee > for DTC, and deposited with the Transfer Agent on behalf of DTC. The > global certificates will evidence all of the Shares outstanding at > any time. The representations, undertakings and agreements made on > the part of the Trust in the global certificates are made and intended > for the purpose of binding only the Trust and not the Transfer Agent > or the Sponsor individually. --- 7661,7664c8093,8096 ----------------------- < or redeemed to the accounts of the appropriate DTC Participants. < The Trust Agency Service Provider and the Authorized Participants < will designate the accounts to be credited and charged in the case < of creation or redemption of the Shares. > or redeemed to the accounts of the appropriate DTC Participants. The > Transfer Agent and the Authorized Participants will designate the > accounts to be credited and charged in the case of creation or > redemption of the Shares. --- 7687,7689c8119,8121 ----------------------- < DTC may decide to discontinue providing its service with respect < to Baskets and/or the Shares by giving notice to the Trust Agency < Service Provider and the Sponsor. > DTC may decide to discontinue providing its service with respect to > Baskets and/or the Shares by giving notice to the Transfer Agent and > the Sponsor. --- 7695c8127 ----------------------- < 91 > 98 --- 7709c8141 ----------------------- < 92 > 99 --- 7717,7719c8149,8151 ----------------------- < The Trust Agency Service Provider will keep proper books of record < and account of the Trust at its office located in New York or such < office as it may subsequently designate. > The Transfer Agent will keep proper books of record and account of > the Trust at its office located in Massachusetts or such office as > it may subsequently designate. --- 7721,7729c8153,8160 ----------------------- < during the usual business hours of the Trust Agency Service Provider < by any person who establishes to the Trust Agency Service Provider's < satisfaction that such person is a Shareholder. < < The Trust Agency Service Provider also will keep a copy of the Trust < Agreement and the Trust Agency Service Provider Agreement, on file < in its office which will be available for inspection on reasonable < advance notice at all reasonable times during its usual business < hours by any Shareholder. > during the usual business hours of the Transfer Agent by any person > who establishes to the Transfer Agent's satisfaction that such person > is a Shareholder. > > The Transfer Agent also will keep a copy of the Trust Agreement and the > Transfer Agency and Services Agreement, on file in its office which > will be available for inspection on reasonable advance notice at all > reasonable times during its usual business hours by any Shareholder. --- 7747,7750c8178,8181 ----------------------- < The Sponsor will also prepare, or cause to be prepared, and file any < periodic reports or updates required under the Exchange Act. < The Trust Agency Service Provider will assist and support the Sponsor < in the preparation of such reports. > The Sponsor will also prepare, or cause to be prepared, and file > any periodic reports or updates required under the Exchange Act. The > Transfer Agent will assist and support the Sponsor in the preparation > of such reports. --- 7755,7761c8186,8187 ----------------------- < accountants report will be furnished by the Trust Agency Service < Provider to Shareholders upon request. < < The Trust Agency Service Provider will make such elections, file such < tax returns, and prepare, disseminate and file such tax reports, as < it is advised to by its counsel or accountants or as required from < time to time by any applicable statute, rule or regulation. > accountants' report will be furnished by the Transfer Agent to > Shareholders upon request. --- 7769c8195 ----------------------- < 93 > 100 --- 7775,7777c8201,8203 ----------------------- < The Trust operates in accordance with the DSTA and under the terms of < the Trust Agreement, as well as pursuant to the terms of the Trust < Servicing Agreement, the Trust Agency Services Provider Agreement > The Trust operates in accordance with the DSTA and under the terms > of the Trust Agreement, as well as pursuant to the terms of the > Administration Agreement, the Transfer Agent and Service Agreement --- 7784,7849d8209 ----------------------- < The Trust Agreement establishes the roles of the Sponsor and the < Trustee and sets forth the rights and duties of each party. < < The Sponsor < < This section summarizes some of the important provisions of the Trust < Agreement which apply to the Sponsor. For a general description of < the Sponsor's role concerning the Trust, see " < The Sponsor- < The Sponsor's Role." < < Liability of the Sponsor and indemnification < < The Sponsor will not be liable to the Trust or any Shareholder for any < action taken, or for refraining from taking any action in good faith, < or for errors in judgment or for depreciation or loss incurred by < reason of the sale of bitcoin or other assets of the Trust. < However, the preceding liability exclusion will not protect the < Sponsor against any liability resulting from its own gross negligence, < willful misconduct or bad faith in the performance of its duties. < < The Sponsor and its members, managers, directors, officers, < employees, affiliates (as such term is defined under the Securities < Act) and subsidiaries shall be indemnified by the Trust and held < harmless against any loss, liability or expense incurred without < gross negligence, willful misconduct or bad faith on the part of < such indemnified party arising out of or in connection with the < performance of its obligations under the Trust Agreement and under < each other agreement entered into by the Sponsor in furtherance < of the administration of the Trust (including, without limiting < the scope of the foregoing, any Authorized Participant Agreement) < or any actions taken in accordance with the provisions of the Trust < Agreement. Such indemnity shall include payment from the Trust of the < costs and expenses incurred by such indemnified party in defending < itself against any claim or liability in its capacity as Sponsor. Any < amounts payable to an indemnified party may be payable in advance or < shall be secured by a lien on the Trust. < The Sponsor may, in its discretion, undertake any action that it may < deem necessary or desirable in respect of the Trust Agreement and the < interests of Shareholders and, in such event, the legal expenses and < costs of any such actions shall be expenses and costs of the Trust and < the Sponsor shall be entitled to be reimbursed therefor by the Trust. < < The Sponsor may rely on all information provided by the Administrator < for securities filings, including a free writing prospectus or < marketing materials. If such information is incorrect or omits material < information and is the foundation for a claim against the Sponsor, < the Sponsor may be entitled to indemnification from the Trust. < < Successor sponsors < < If the Sponsor is adjudged bankrupt or insolvent, or a receiver of the < Sponsor or of its property is appointed, or a trustee or liquidator or < any public officer takes charge or control of the Sponsor or of its < property or affairs for the purpose of rehabilitation, conservation < or liquidation, then, in any such case, each of the Administrator < and the Trustee may terminate and liquidate the Trust and distribute < its remaining assets. Neither the Administrator nor the Trustee < has any obligation to appoint a successor sponsor or to assume the < duties of the Sponsor, and neither will have any liability to any < person because the Trust is or is not terminated as described in the < preceding sentence. < < 94 < < Table of Contents --- 7851c8211 ----------------------- < The Trustee > Duties of the Sponsor; Conflicts of interest --- 7853,7856c8213,8254 ----------------------- < This section summarizes some of the important provisions of the Trust < Agreement which apply to the Trustee. For a general description < of the Trustee's role concerning the Trust, see "The Trustee-The < Trustee's Role." > To the extent that, at law or in equity, the Sponsor has duties > (including fiduciary duties) and liabilities relating thereto to > the Trust, the Shareholders or to any other Person, the Sponsor > acting under the Trust Agreement shall not be liable to the Trust, > the Shareholders or to any other Person for its good faith reliance > on the provisions of the Trust Agreement. The provisions of the Trust > Agreement, to the extent that they restrict or eliminate the duties > and liabilities of the Sponsor otherwise existing at law or in equity > replace such other duties and liabilities of the Sponsor. To the > fullest extent permitted by law, no person other than the Sponsor > and the Trustee shall have any duties (including fiduciary duties) > or liabilities at law or in equity to the Trust and the Shareholders > (including any Person that becomes a Shareholder) or any other person. > > In the absence of bad faith by the Sponsor, the resolution, action or > terms so made, taken or provided by the Sponsor regarding a conflict > of interest shall not constitute a breach of the Trust Agreement or of > any duty or obligation of the Sponsor at law or in equity or otherwise. > > The Sponsor and any affiliate of > the Sponsor may engage in or possess an interest in other > profit-seeking or business ventures of any nature or description, > independently or with others, whether or not such ventures are > competitive with the Trust and the doctrine of corporate opportunity, > or any analogous doctrine, shall not apply to the Sponsor. If the > Sponsor acquires knowledge of a potential transaction, agreement, > arrangement or other matter that may be an opportunity for the Trust, > it shall have no duty to communicate or offer such opportunity to > the Trust, and the Sponsor shall not be liable to the Trust or to > the Shareholders for breach of any fiduciary or other duty by reason > of the fact that the Sponsor pursues or acquires for, or directs such > opportunity to another Person or does not communicate such opportunity > or information to the Trust. Neither the Trust nor any Shareholders > shall have any rights or obligations by virtue of the Trust Agreement > or the trust relationship in or to such independent ventures or the > income or profits or losses derived therefrom, and the pursuit of such > ventures, even if competitive with the activities of the Trust, shall > not be deemed wrongful or improper. Except to the extent expressly > provided in the Trust Agreement, > the Sponsor may engage or be interested in any financial or other > transaction with the Trust, the Shareholders or any affiliate of the > Trust or the Shareholders. --- 7860,7866c8258,8266 ----------------------- < The Trustee and any successor trustee must be < (i) a bank, trust company, corporation or national banking association < organized and doing business under the laws of the United States < or any of its states, and authorized under such laws to exercise < corporate trust powers. < The Trustee and any successor trustee must have, at all times, an < aggregate capital, surplus, and undivided profits of at least $[ ]. > The Trustee and any successor trustee must satisfy the requirements > of Section 3807 of the DSTA and be authorized to exercise corporate > trust powers under the laws of the jurisdiction of its organization. > The Trustee and any successor trustee must have, at all times, > an aggregate capital, surplus, and undivided profits of at least > $50,000,000 and subject to supervision or examination by federal or > state authorities. In case at any time the Trustee shall cease to be > eligible in accordance with the above provisions, the Trustee shall > resign promptly. --- 7870,7876c8270,8278 ----------------------- < The Trustee is a fiduciary under the Trust Agreement; provided, < however, that the fiduciary duties, responsibilities and liabilities of < the Trustee are limited by, and are only those specifically set forth < in, the Trust Agreement. For limitations on the fiduciary duties of < the Trustee, see the limitations on liability set forth below in "The < Trustee-Limitation on Trustee's liability" and "The Trustee-Trustee's < liability for agents." > To the extent that, at law or in equity, the Trustee has duties > (including fiduciary duties) and liabilities relating thereto to the > Trust or the Sponsor, such duties and liabilities will be replaced > by the duties and liabilities of the Trustee expressly set forth in > the Trust Agreement. > > 101 > > Table of Contents --- 7880,7883c8282,8285 ----------------------- < Under the Trust Agreement, the Sponsor has exclusive control of the < management of all aspects of the business of the Trust and the Trustee < has only nominal duties and liabilities to the Trust, as described < in the remainder of this paragraph. > The Sponsor has exclusive control of the management of all aspects > of the business of the Trust and the Trustee has only nominal duties > and liabilities to the Trust, as described in the remainder of this > paragraph. --- 7893c8295 ----------------------- < to execute under the DSTAt. > to execute under the DSTA. --- 7897c8299 ----------------------- < Trust or Shareholders, such duties and liabilities will be replaced > Trust or the Sponsor, such duties and liabilities will be replaced --- 7902c8304 ----------------------- < Trust Agency Service Provider, Custodian or any other entity or person. > Transfer Agent, Custodian or any other entity or person. --- 7904,7944c8306,8362 ----------------------- < Neither the Trustee, either in its capacity as trustee on in its < individual capacity, nor any director, officer or controlling person < of the Trustee is, or has any liability as, the issuer, director, < officer or controlling person of the issuer of the Shares. The < Trustee's liability in connection with the issuance and sale of the < Shares is limited solely to the express obligations of the Trustee < as set forth in the Trust Agreement. < < The Trustee will not be liable for the disposition of bitcoin or moneys < which is made in accordance with the Trust Agreement or otherwise, or < for any action taken or omitted or for any loss or injury resulting < from its actions or its performance or lack of performance of its < duties under the Trust Agreement in the absence of gross negligence, < willful misconduct or bad faith on its part. In no event will the < Trustee be liable for acting in accordance with or conclusively < relying upon any instruction, notice, demand, certificate or document < (i) from the Sponsor, the Administrator, the Trust Agency Service < Provider or the Custodian or any entity acting on behalf of which < the Trustee believes is given as authorized by the Trust Agreement, < The Trust Servicing Agreement, the Trust Agency Service Provider < Agreement or the Trust Custody Agreement, respectively, or < (ii) from or on behalf of any Authorized Participant which the Trustee < believes is given pursuant to, or is authorized by, an Authorized < Participant Agreement. In no event will the Trustee be liable for < acting or omitting to act in reliance upon the advice of or information < from legal counsel, accountants or any other person believed by it < in good faith to be competent to give such advice or information. < In addition, the Trustee will not be liable < < 95 < < Table of Contents < < for any delay in performance or for the non-performance of any of its < obligations under the Trust Agreement by reason of causes beyond its < reasonable control, including acts of God, war or terrorism. < The Trustee will not be liable for any indirect, consequential, < punitive or special damages, regardless of the form of action and < whether or not any such damages were foreseeable or contemplated, < or for an amount in excess of the value of the < Trust's assets. > The Trustee will not be liable for any action taken or omitted or > for any loss or injury resulting from its actions or its performance > or lack of performance of its duties under the Trust Agreement in > the absence of gross negligence, willful misconduct or bad faith on > its part. > The Trustee shall not be liable with respect to any action omitted to > be taken in the case of documents received by the Trustee which do not > materially conform to the requirements of the Trust Agreement until > such corrected documents or satisfactory explanation is received by > the Trustee. In the absence of willful misconduct on the part of the > Trustee, the Trustee may conclusively rely, as to the truth of the > statements and the correctness of the opinions expressed therein, upon > any certificates or opinions furnished to the Trustee and conforming > to the requirements of the Trust Agreement. > The Trustee shall not be liable for an error of judgment made in good > faith by an officer or employee of the Trustee, unless it shall be > proved that the Trustee was grossly negligent in ascertaining the > pertinent facts. > Additionally, the Trustee shall not be liable with respect to any > action taken, suffered or omitted to be taken by it in good faith in > accordance with the direction of the Sponsor or any other person with > the right to direct the Trustee. > > Additionally, the Trustee shall be under no obligation to exercise > any of the duties or powers vested in it by the Trust Agreement; or to > make any investigation of matters arising under the Trust Agreement; > or to institute, conduct or defend any litigation; or (except as > provided in the Trust Agreement) to make any investigation into the > facts or matters stated in any document, unless requested in writing > to do so by the Sponsor. > The Trustee shall not be liable for any action reasonably taken, > suffered or omitted by it in good faith and believed by it to be > authorized or within the discretion or rights or powers conferred > upon it by the Trust Agreement. In the absence of gross negligence, > willful misconduct or bad faith on the part of the Trustee, a > certificate signed by the Sponsor shall be full warrant for the > Trustee to take or refrain from taking action under the provisions > of the Trust Agreement. In no event shall the Trustee be liable for > special, indirect, punitive or consequential loss or damage of any > kind whatsoever (including but not limited to lost profits), even > if the Trustee has been advised of the likelihood of such loss or > damage and regardless of the form of action. In no event shall the > Trustee be liable for any failure or delay in the performance of > its obligations under the Trust Agreement because of circumstances > beyond its control as described in the Trust Agreement, including > acts of God, war or terrorism, provided, however, that the Trustee > shall exercise commercially reasonable efforts to resume performance > of its obligations hereunder as soon as practicable under the > circumstances. In the absence of bad faith, the Trustee shall have > no liability for taking or refraining from action directed by the > Sponsor if it shall have reasonably determined or shall have been > advised by counsel, that such performance may involve the Trustee in > personal liability or is contrary to the terms of the Trust Agreement. > The Trustee shall have no obligation or duty to monitor the > Trust's obligations and duties under the agreements to which the > Trust or the Trustee is a party or to ensure its compliance with the > terms thereof. --- 7948,7960c8366,8371 ----------------------- < The Trustee will not be answerable for the default of the < Administrator, the Trust Agency Service Provider or the Custodian < (or any entity acting on behalf of which Custodian or any successor < custodian of the Trust) engaged at the direction of the Sponsor. < The Trustee may employ agents, attorneys, accountants, auditors < and other professionals and shall not be answerable for the default < or misconduct of any of them if they were selected with reasonable < care. The fees and expenses charged by any successor custodians to the < Trust, agents, attorneys, accountants, auditors or other professionals, < and expenses reimbursable to any successor custodian under a custody < agreement authorized by the Trust Agreement, exclusive of fees for < services to be performed by the Trustee, will be expenses of the < Sponsor or the Trust. > The Trustee may employ with due care agents, nominees, or > attorneys-in-fact and shall not be responsible for any willful > misconduct or negligence on the part of such agents, nominees, > or attorneys-in-fact. The appointment of agents, nominees, or > attorneys-in-fact will not relieve the Trustee of any of its > obligations or liabilities under the Trust Agreement. --- 7962c8373 ----------------------- < Taxes > 102 --- 7964,7975c8375 ----------------------- < The Trustee will not be personally liable for any taxes or other < governmental charges imposed upon bitcoin, moneys or other Trust < assets in its custody, upon the income therefrom or the gains or < proceeds from the sale thereof, or upon it as Trustee in respect of < the Trust or the Shares, which taxes or charges it may be required < to pay under any present or future law of the United States or of < any other taxing authority having jurisdiction. < The Trustee will be reimbursed and indemnified out of the < Trust's assets for all such taxes and charges and for any expenses, < including counsel's fees, which the Trustee may sustain or incur as < a result of such taxes or charges, and the payment of such amounts < shall be secured by a lien on the Trust. > Table of Contents --- 7979,8019c8379,8391 ----------------------- < The Trustee, its directors, employees and agents shall be indemnified < and defended by the Trust and the Sponsor, jointly and severally, and < held harmless against any and all losses, claims, damages, liabilities, < joint or several, expenses (including legal fees and expenses), < judgments, fines, penalties, interest, settlements or other amounts < arising from any and all threatened, pending or completed claims, < demands, actions, suits or proceedings, whether civil, criminal, < administrative or investigative, and whether formal or informal and < including appeals, in which any indemnitee may be involved, or is < threatened to be involved, as a party or otherwise, by reason of < its status as an indemnitee whether arising from acts or omissions < to act occurring before or after the date of the Trust Agreement, < (including the Trustee's indemnification obligations under these < agreements) or by reason of the Trustee's acceptance of the Trust < Agreement incurred without gross negligence, willful misconduct or < bad faith on the part of such indemnified party in connection with < the performance of its obligations under the Trust Agreement or any < such other agreement or any actions taken in accordance with the < provisions of the Trust Agreement or any such other agreement. Such < indemnity shall include payment from the Trust or the Sponsor of the < costs and expenses incurred by such indemnified party in defending < itself against any claim or liability in its capacity as Trustee. Any < amounts payable to an indemnified party may be payable in advance or < shall be secured by a lien on the Trust. < < Protection for amounts due to Trustee < < If any fees or costs owed to the Trustee under the Trust Agreement < are not paid when due by the Sponsor, the Trustee may instruct the < Custodian to transfer out of the Trust Custody Account any Trust < assets, and thereafter cause the sale or other disposition of any such < assets (including bitcoin) and pay itself from the proceeds; provided, < however, that the Trustee may not charge to the Trust unpaid fees owed < to the Trustee by the Sponsor in excess of the fees payable to the < Sponsor by the Trust without regard to any waiver by the Sponsor of < its fees. As security for all obligations owed to the Trustee under < the Trust Agreement, the Trustee is granted a continuing security < interest in, and a lien on, the < Trust's assets and all Trust distributions. < < 96 > The Trustee, its officers, directors, employees, affiliates and agents > shall be indemnified and defended by the Trust and held harmless > against any and all losses, damages, liabilities, claims, actions, > suits, costs, expenses, disbursements (including reasonable legal > fees and expenses in connection with enforcement of its rights to > indemnity under the Trust Agreement and including the reasonable > fees and expenses of counsel), taxes and penalties of any kind > and nature whatsoever to the extent that such expenses relate to > the performance of the Trust Agreement, the creation, operation or > termination of the Trust, provided that the expenses are incurred > without willful misconduct, bad faith or gross negligence of such > indemnified party. Any amounts payable to an indemnified party may > be payable in advance or shall be secured by a lien on the Trust. --- 8021c8393 ----------------------- < Table of Contents > Resignation, discharge or removal of Trustee; successor trustees --- 8023c8395,8416 ----------------------- < Holding of Trust property other than bitcoin > The Trustee may at any time resign as Trustee upon thirty (30) days' > prior written notice of its election so to do, delivered to the > Sponsor, and such resignation shall take effect upon the appointment > of a successor trustee and its acceptance of such appointment. If no > successor has been appointed by the Sponsor within such thirty (30) > day period, the Trustee may, at the expense of the Trust, petition > a court to appoint a successor trustee. > > If at any time the Trustee shall cease to be eligible because it > ceases to satisfy the requirements under the Trust Agreement, or if > at any time the Trustee shall become incapable of acting, or shall > be adjudged bankrupt or insolvent, or a receiver of the Trustee or > of its property shall be appointed, or any public officer shall take > charge or control of the Trustee or of its property or affairs for > the purpose of rehabilitation, conservation or liquidation, then > the Sponsor may remove the Trustee and appoint a successor trustee by > written instrument which instrument shall be delivered to the Trustee > and the successor trustee. > > The declination to serve, resignation, removal of the Trustee, or > all of them, shall not operate to annul the Trust or to revoke any > existing agency created pursuant to the terms of the Trust Agreement. --- 8025,8057c8418,8420 ----------------------- < The Trust will hold and record the ownership of the < Trust's assets pursuant to the Trust Servicing Agreement and Custody < Agreement in a manner so that it will be owned for the benefit of < Shareholders for the purposes of, and subject to and limited by the < terms and conditions set forth in, the Trust Agreement. Other than < issuance and sale of the Shares, the Trust shall not issue or sell < any certificates or other obligations or, except as provided in the < Trust Agreement, otherwise incur, assume or guarantee any indebtedness < for money borrowed or lend any assets owned by the Trust. < < All moneys, if any, held by the Administrator under the Trust Servicing < Agreement or by the Trustee under the Trust Agreement shall be held by < it, without interest thereon or investment thereof, as a deposit for < the account of the Trust. Such monies held hereunder shall be deemed < segregated by maintaining such monies in an account or accounts for < the exclusive benefit of the Trust. < The Trustee may also employ custodians for Trust assets other than < bitcoin, if any, including agents, attorneys, accountants, auditors < and other professionals and shall not be answerable for the default < or misconduct of any such custodians, agents, attorneys, accountants, < auditors and other professionals if such custodians, agents, attorneys, < accountants, auditors or other professionals shall have been selected < with reasonable care. Any Trust assets other than bitcoin or cash, < if any, will be held by the Administrator either directly or through < the Federal Reserve/Treasury Book Entry System for United States and < federal agency securities ("Book Entry System"), DTC, or through any < other clearing agency or similar system ("Clearing Trust Agency"), < if available. < The Trustee will have no responsibility or liability for the actions or < omissions of the Book Entry System, DTC or any Clearing Trust Agency. < The Trustee shall not be liable for ascertaining or acting upon any < calls, conversions, exchange offers, tenders, interest rate changes, < or similar matters relating to securities held at DTC. > The Sponsor may remove the Trustee and appoint a successor trustee > in its discretion by written notice delivered to the Trustee at least > thirty (30) days prior to such date. --- 8059c8422 ----------------------- < Resignation, discharge or removal of Trustee; successor trustees > Amendments to the Trust Agreement --- 8061,8096c8424,8458 ----------------------- < The Trustee may at any time resign as Trustee by written notice of < its election so to do, delivered to the Sponsor, and such resignation < shall take effect upon the appointment of a successor trustee and < its acceptance of such appointment. < < The Sponsor may remove the Trustee in its discretion by written notice < delivered to the Trustee at least ninety (90) days prior to such date. < < The Sponsor may also remove the Trustee at any time if the Trustee < (i) ceases to be a Qualified Bank (as defined below) or < (ii) is in material breach of its obligations under the Trust Agreement < and fails to cure such breach within thirty (30) days after receipt < of written notice from the Sponsor or Shareholders acting on behalf of < at least twenty-five (25) percent of the outstanding Shares specifying < such default and requiring the Trustee to cure such default. < Under such circumstances, the Sponsor, acting on behalf of < Shareholders, may remove the Trustee by written notice delivered to < the Trustee and such removal shall take effect upon the appointment < of a successor trustee and its acceptance of such appointment. < < A "Qualified Bank" means a bank, trust company, corporation or national < banking association organized and doing business under the laws of the < United States or any State of the United States that is authorized < under those laws to exercise corporate trust powers and that had, < as of the date of its most recent annual financial statements, an < aggregate capital, surplus and undivided profits of at least $[ ]. < < The Sponsor may also remove the Trustee at any time if the Trustee < merges into, consolidates with or is converted into another corporation < or entity in a transaction in which the Trustee is not the surviving < entity. The surviving entity from such a transaction shall be the < successor of the Trustee without the execution or filing of any < document or any further act; however, during the ninety (90) day < period following the effectiveness of such transaction, < the Sponsor may, by written notice to the Trustee, remove the Trustee < and designate a successor trustee. > The Sponsor may, without the approval of the Shareholders, make such > amendments to the Trust Agreement which > (i) are necessary to add to the representations, duties or obligations > of the Sponsor or surrender any right or power granted to the Sponsor > herein, for the benefit of the Shareholders; > (ii) are necessary to cure any ambiguity, to correct or supplement > any provision in the Trust Agreement which may be inconsistent with > any other provision in the Trust Agreement or in this registration > statement, or to make any other provisions with respect to matters > or questions arising under the Trust Agreement or this registration > statement which will not be inconsistent with the provisions of the > Trust Agreement or this registration statement; or > (iii) the Sponsor deems advisable, provided, however, that no amendment > shall be adopted unless the adoption thereof (a) is not adverse to > the interests of the Shareholders, (b) is consistent with the powers > under the Trust Agreement, (c) does not affect the allocation of > profits and losses among the Shareholders or between the Shareholders > and the Sponsor, and (d) does not adversely affect the limitations on > liability of the Shareholders or the status of the Trust as a grantor > trust for U.S. federal income tax purposes. Amendments to the Trust > Agreement which adversely affect > (i) the rights of Shareholders, > (ii) the dissolution of the Trust, and > (iii) any material changes in the > Trust's basic investment policies or structure shall occur only upon > the written approval or affirmative vote of Shareholders holding > Shares equal to at least a majority (over 50%) of the Shares. > > Notwithstanding the above, > the Sponsor may, without the approval of the Shareholders, amend the > provisions of the Trust Agreement if the Trust is advised at any time > by the > Trust's accountants or legal counsel that the amendments made are > necessary to ensure that the Trust will qualify as a grantor trust > for U.S. federal income tax purposes. --- 8098c8460 ----------------------- < 97 > 103 --- 8102,8146c8464,8498 ----------------------- < If the Trustee resigns or is removed, the Sponsor, acting on behalf < of-Shareholders, shall use its reasonable efforts to appoint a < successor trustee, which shall be a Qualified Bank. Every successor < trustee shall execute and deliver to its predecessor and to the < Sponsor, acting on behalf of Shareholders, an instrument in writing < accepting its appointment hereunder, and thereupon such successor < trustee, without any further act or deed, shall become fully vested < with all the rights, powers, duties and obligations of its predecessor; < but such predecessor, nevertheless, upon payment of all sums due < it and on the written request of the Sponsor, acting on behalf of < Shareholders, shall execute and deliver an instrument transferring to < such successor all rights and powers of such predecessor hereunder, < shall duly assign, transfer and deliver all right, title and interest < in the < Trust's assets to such successor, and shall deliver to such successor < a list of Shareholders of all outstanding Shares. < The Sponsor or any such successor trustee shall promptly mail notice < of the appointment of such successor trustee to Shareholders. < < If the Trustee resigns and no successor trustee is appointed within < sixty (60) days after the date the Trustee issues its notice of < resignation, the Trustee will terminate and liquidate the Trust and < distribute its remaining assets. < < Amendments to the Trust Agreement < < The Sponsor may amend any provisions of the Trust Agreement without < the consent of any Shareholder. Any amendment that imposes or < increases any fees or charges (other than taxes and other governmental < charges, registration fees or other such expenses), or that otherwise < prejudices any substantial existing right of Shareholders will not < become effective as to outstanding Shares until thirty (30) days after < notice of such amendment is given to Shareholders. Amendments to allow < redemption for quantities of bitcoin smaller or larger than a Basket or < to allow for the sale of bitcoin to pay cash proceeds upon redemption < shall not require notice pursuant to the preceding sentence. Every < Shareholder, at the time any amendment becomes so effective, shall < be deemed, by continuing to hold any Shares or an interest therein, < to consent and agree to such amendment and to be bound by the Trust < Agreement as amended thereby. In no event shall any amendment impair < the right of the Shareholder to surrender Shares and receive delivery < of the amount of Trust assets (paid in cash) represented by those < Shares (less fees in connection with the surrender of Shares and any < applicable taxes or other governmental charges), except in order to < comply with mandatory provisions of applicable law. > No amendment affecting the rights or duties of the Trustee shall > be binding upon or effective against the Trustee unless consented > to by the Trustee in writing. No amendment shall be made to the > Trust Agreement without the consent of the Trustee if it reasonably > believes that such amendment adversely affects any of the rights, > duties or liabilities of the Trustee. > The Trustee shall be under no obligation to execute any amendment > to the Trust Agreement or to any agreement to which the Trust is a > party until it has received an instruction letter from the Sponsor, > in form and substance reasonably satisfactory to the Trustee > (i) directing the Trustee to execute such amendment, > (ii) representing and warranting to the Trustee that such execution > is authorized and permitted by the terms of the Trust Agreement and > (if applicable) such other agreement to which the Trust is a party > and does not conflict with or violate any other agreement to which > the Trust is a party, and > (iii) confirming that such execution and acts related thereto are > covered by the indemnity provisions of the Trust Agreement in favor > of the Trustee and do not adversely affect the Trustee. > > Trust Limitations > > Notwithstanding anything contained in the Trust Agreement, the Trust > and the Sponsor shall not, and any other Person acting for or on > behalf of the Trust shall cause the Trust not to: > (i) acquire any asset other than bitcoin; > (ii) sell or otherwise dispose of Trust assets other than in order > to pay expenses of the Trust, to facilitate the termination of the > Trust or to facilitate a redemption; > (iii) have any power to or consent to any action that would vary > the investment (within the meaning of Treasury Regulation section > 301.7701-4(c)) of the Trust or the Shareholders or > (iv) take any action or fail to take any action that would cause the > Trust to fail or cease to qualify as a grantor trust for U.S. federal > income tax purposes. --- 8150,8153c8502,8505 ----------------------- < The Administrator will set a date on which the Trust shall terminate < and mail notice of the termination to Shareholders at least thirty < (30) days prior to the date set for termination if any of the < following occurs: > The Trust may be dissolved at the written direction of the Sponsor. > At its discretion, > the Sponsor may elect to terminate the Trust in certain circumstances, > which include, without limitation: --- 8159,8161c8511,8513 ----------------------- < o Shareholders acting in respect of at least seventy (75) percent of < the outstanding Shares notify the Administrator that they elect to < terminate the Trust; > o Shareholders acting in respect of at least seventy-five (75) > percent of the outstanding Shares notify the Sponsor that they elect > to terminate the Trust; --- 8163c8515 ----------------------- < o sixty (60) days have elapsed since the Trustee notified the Sponsor > o thirty (30) days have elapsed since the Trustee notified the Sponsor --- 8168,8170c8520,8521 ----------------------- < the Investment Company Act, and the Administrator receives notice < from the Sponsor that, because of such determination, termination of < the Trust is advisable; > the Investment Company Act, and the Sponsor determines that, because > of such determination, termination of the Trust is advisable; --- 8173,8176c8524,8525 ----------------------- < CEA, and the Administrator receives notice from the Sponsor that, < because of such determination, termination of the Trust is advisable; < < 98 > CEA, and the Sponsor determines that, because of such determination, > termination of the Trust is advisable; --- 8178d8526 ----------------------- < Table of Contents --- 8182c8530 ----------------------- < determined to be an MT or equivalent designation under the laws of any > determined to be a MT (or equivalent designation) under the laws of any --- 8190,8192c8538,8539 ----------------------- < Administrator receives notice from the Sponsor that the Sponsor < determines that, because of such tax treatment or change in tax < treatment, termination of the Trust is advisable; > Sponsor determines that, because of such tax treatment or change in > tax treatment, termination of the Trust is advisable; --- 8196a8544,8546 ----------------------- > 104 > > Table of Contents --- 8198c8548 ----------------------- < closing price of the Shares, was less than $[ ] million (as adjusted > closing price of the Shares, was less than $10 million (as adjusted --- 8201c8551 ----------------------- < Trust's formation and the Administrator receives, within six (6) > Trust's formation and the Sponsor determines, within six (6) --- 8203,8204c8553,8554 ----------------------- < capitalization of the Trust was less than $[ ] million, notice from < the Sponsor of its decision to terminate the Trust; > capitalization of the Trust was less than $10 million, to terminate > the Trust; --- 8210c8560 ----------------------- < o the Administrator elects to terminate the Trust after the Sponsor > o the Trustee elects to terminate the Trust after the Sponsor --- 8225,8234c8575,8590 ----------------------- < In respect of termination events that rely on Sponsor determinations < to terminate the Trust (i.e., if the CFTC determines that the Trust < is a commodity pool under the CEA; the Trust is determined to be an < MT under the regulations promulgated by FinCEN; the Trust fails to < qualify for treatment, or ceases to be treated, as a grantor trust < for U.S. federal income tax purposes; or, following a resignation by < a trustee or custodian, the Sponsor determines that no replacement < is acceptable to it), < the Sponsor may make any such determination in its sole discretion. < The Sponsor may consider, without limitation, the profitability to the > The Sponsor may make any such determination in its sole discretion. > The Sponsor may direct the Trustee to utilize the Custodian or > another party, including an affiliate of the Trustee, Custodian or > Administrator, to liquidate the assets of the Trust in the event of > the termination of the Trust. An Authorized Participant may, but is > not required to, participate in the liquidation of the Trust. > If the Trustee or a designated receiver decides to liquidate the > assets of the Trust by participating in the two-sided auction which > occurs daily at 4:00 p.m. Eastern Time on the Gemini Exchange, the > Trust, the Sponsor, the Custodian, and any other affiliated entity > will interact with the auction with the same standing and access as > any other customer of the Custodian and without any special priority, > privilege, or access to information. > > In determining to terminate the Trust, > the Sponsor may consider, without limitation, the profitability to the --- 8260,8266c8616,8619 ----------------------- < 99 < < Table of Contents < < On and after the date of termination of the Trust, Shareholders will < be entitled to the distribution of the amount of Trust assets (paid < in cash) represented by those Shares, upon > On and after the date of termination of the Trust and upon completion > of the winding up of the Trust in accordance with the DSTA, > Shareholders will be entitled to the distribution of the amount of > Trust assets (paid in cash) represented by those Shares, upon --- 8268,8269c8621,8622 ----------------------- < (ii) payment of any fee to the Trust Agency Service Provider in < connection with the surrender of Shares and > (ii) payment of the expenses of liquidation and termination and any fee > to the Transfer Agent in connection with the surrender of Shares and --- 8274c8627 ----------------------- < the Trust Agency Service Provider thereafter shall > the Transfer Agent thereafter shall --- 8277,8327c8630,8631 ----------------------- < under the Trust Agreement and the Trust Agency Service Provider < Agreement. < The Administrator will (or will cause to) continue to pay the < Trust's expenses and sell bitcoin as necessary, as directed by the < Sponsor, to meet those expenses and will (or will cause to) continue < to distribute Trust assets (paid in cash), as well as the net proceeds < from the sale of any other property, to Shareholders in exchange for < Shares surrendered (less any fees due to the Trust Agency Service < Provider for the surrender of Shares, any expenses for the account of < Shareholders in accordance with the terms and conditions of the Trust < Agreement, and any applicable taxes or other governmental charges). < < At any time after the expiration of [ ] days following the date of the < Trust's termination, the Administrator may sell the Trust assets < then held under the Trust Agreement and may thereafter hold the net < proceeds of any such sale, together with any other cash then held < by the Administrator under the Trust Agreement, without liability < for interest, for the pro rata benefit of Shareholders that have not < theretofore surrendered their Shares. < The Administrator will cause bitcoin to be sold through dealers or by < the Administrator directly on a Bitcoin Exchange (which may include < the Gemini Exchange), as directed by the Sponsor or, in the absence < of such direction, with dealers or on Bitcoin Exchanges through which < the Administrator may reasonably expect to obtain a favorable price < and good execution of orders. < The Administrator may consider the market price (relative to the < value of a bitcoin as represented by the Gemini Exchange Spot Price) < expected to be obtained by such dealer or through such Bitcoin Exchange < and the ability of the dealer or Bitcoin Exchange to conduct the sale < of bitcoin with a minimal impact on the market price of bitcoin. < The Administrator may offset the importance of one factor against < the remaining factors. < The Custodian may be the purchaser of such bitcoin only if the sale < transaction is made at the next Gemini Exchange Spot Price or such < other publicly available price that the Sponsor deems fair, in each < case as set following the sale order. Neither the Administrator nor < the Sponsor is liable for depreciation or loss incurred by reason of < any sale. < See "United States Federal Income Tax Consequences-Taxation of < U.S. Shareholders" for information regarding the tax treatment of < bitcoin sales. After making such sale, the Administrator shall < be discharged from all obligations under the Trust Servicing < Agreement, except to account for such net proceeds and other cash < (after deducting, in each case, any fees, expenses, taxes or other < governmental charges payable by the Trust, any fee to the Administrator < for the surrender of the Shares and any expenses for the account of < Shareholders in accordance with the terms and conditions of the Trust < Agreement, and any applicable taxes or other governmental charges). < Upon the termination of the Trust, the Sponsor shall be discharged < from all obligations under the Trust Agreement except for certain < obligations that survive termination of the Trust Agreement. > under the Transfer Agency and Services Agreement. > The Sponsor will (or will --- 8329c8633,8647 ----------------------- < Governing law; consent to New York jurisdiction > 105 > > Table of Contents > > cause to) continue to pay the > Trust's expenses and sell bitcoin as necessary to meet those expenses > and will (or will cause to) continue to distribute Trust assets > (paid in cash), as well as the net proceeds from the sale of any > other property, to Shareholders in exchange for Shares surrendered > (less any fees due to the Transfer Agent for the surrender of Shares, > any expenses for the account of Shareholders in accordance with the > terms and conditions of the Trust Agreement, and any applicable taxes > or other governmental charges). > > Governing law; consent to Delaware jurisdiction --- 8333,8343c8651,8720 ----------------------- < Trust's global certificates for the Shares) and Shareholders under < the Trust Agreement are governed by the laws of the State of Delaware. < The Trust Servicing Agreement, Trust Agency Service Provider Agreement, < Trust Custody Agreement and Authorized Participant Agreements are < governed by the laws of the State of New York. < The Sponsor, the Trustee and DTC and, by accepting the Shares, each < DTC Participant and each Shareholder, consents to the jurisdiction of < the courts of the State of New York and any federal courts located < in the borough of Manhattan in New York City. Such consent is not < required for any person to assert a claim of New York jurisdiction < over the Sponsor or the Trustee. > Trust's global certificates for the Shares) and Shareholders under the > Trust Agreement are governed by the laws of the State of Delaware. The > Trustee, each Shareholder and each Person beneficially owning an > interest in a Share of the Trust irrevocably > (i) consents to the jurisdiction of the Court of Chancery of the > State of Delaware or, if such court does not have subject matter > jurisdiction thereof, any other court in the State of Delaware with > subject matter jurisdiction; > (ii) submits to the exclusive jurisdiction of such courts in connection > with any such claim, suit, action or proceeding; > (iii) agrees not to, and waives any right to, assert in any such > claim, suit, action or proceeding that the jurisdiction lacks personal > jurisdiction or is an inconvenient forum or improper venue; > (iv) consents to process being served in any such claim, suit, action > or proceeding by mailing, certified mail, return receipt requested, > a copy thereof to such party at the address in effect for notices > hereunder, and agrees that such service shall constitute good and > sufficient service of process and notice thereof; and > (v) waives any and all right to trial by jury in any such claim, > suit, action or proceeding. > > The validity and construction of the Trust Agreement shall be governed > by the laws of the State of Delaware, and the rights of all parties and > the effect of every provision of the Trust Agreement shall be subject > to and construed according to the laws of the State of Delaware without > regard to the conflicts of law provisions thereof; provided, however, > that the provisions of the Trust Agreement shall control over any > contrary or limiting statutory or common law of the State of Delaware > (other than the DSTA) and that, to the maximum extent permitted > by applicable law, there shall not be applicable to the Trust, the > Sponsor, the Trustee, the Shareholders or the Trust Agreement any > provision of the laws (statutory or common) of the State of Delaware > (other than the DSTA) pertaining to trusts which relate to or regulate > in a manner inconsistent with the terms of the Trust Agreement, > including, without limitation, the establishment of fiduciary or > other standards or responsibilities or limitations on the acts or > powers of trustees or beneficial owners that are inconsistent with > the limitations on liability or authorities and powers of the Trustee > or the Shareholders set forth or referenced in the Trust Agreement. > > Derivative and General Direct Actions > > Under the Trust Agreement, no Person who is not a Shareholder shall > be entitled to bring any derivative action, suit or other proceeding > on behalf of the Trust. > Additionally, no Shareholder may maintain a derivative action on > behalf of the Trust unless holders of at least ten percent (10%) > of the outstanding Shares join in the bringing of such action. In > addition to the requirements set forth in Section 3816 of the DSTA, > a Shareholder may bring a derivative action on behalf of the Trust > only if the Shareholder or Shareholders make a pre-suit demand upon > the Sponsor to bring the subject action (unless an effort to cause > the Sponsor to bring such an action is not likely to succeed). A > demand on the Sponsor shall only be deemed not likely to succeed and > therefore excused if the Sponsor has a personal financial interest > in the transaction at issue and the fact that the Sponsor receives > remuneration for his service as > the Sponsor will not disqualify or deem the Sponsor to have a personal > financial interest. Unless a demand is not required, the Sponsor must > be afforded a reasonable amount of time to consider and investigate > such Shareholder request. > > The Trust Agreement, to the fullest extent permitted by Delaware law, > eliminates the Shareholders' right to bring a General Direct Action > against the Trust, the Sponsor and/or its Trustee, except for a > General Direct Action to enforce > (i) an individual Shareholder right to vote or > (ii) an individual Shareholder's rights under Sections 3805(e) or > 3819 of the DSTA. > To the extent such right cannot be eliminated to this extent as a --- 8345c8722,8759 ----------------------- < 100 > 106 > > Table of Contents > > matter of Delaware law, then the Trust Agreement provides that no > Shareholder may maintain a General Direct Action unless holders of > at least ten percent (10%) of the outstanding Shares join in the > bringing of such action. > In addition, a Shareholder may bring a General Direct Action only if > the Shareholder or Shareholders has obtained authorization from the > Sponsor to bring such General Direct Action (unless an effort to cause > the Sponsor to authorize such an action is not likely to succeed). A > demand on the Sponsor shall only be deemed not likely to succeed and > therefore excused if the Sponsor has a personal financial interest > in the transaction at issue and the fact that the Sponsor receives > remuneration for his service as > the Sponsor will not disqualify or deem the Sponsor to have a personal > financial interest. Unless a demand is not required, the Sponsor must > be afforded a reasonable amount of time to consider and investigate > such Shareholder request. > > Hard Fork > > Subject to the terms of the Trust Custody Agreement and this > Registration Statement, in the event of an upcoming modification > to the Bitcoin Network that could potentially result in a hard fork > with two separate and incompatible Bitcoin Networks, the Custodian, > in consultation with the Sponsor, will elect to support the Bitcoin > Network that has the greatest cumulative computational difficulty > for the forty-eight (48) hour period following a given hard fork, in > order to engage in bitcoin transactions and the valuation of bitcoin > on behalf of the Trust. > Under the terms of the Trust Custody Agreement, the Trust may > be required to indemnify the Custodian for any losses arising in > connection with its determination to elect the Bitcoin Network with > the greatest computational difficulty in the event of a hard fork. > > 107 --- 8349c8763 ----------------------- < DESCRIPTION OF THE TRUST SERVICING AGREEMENT > DESCRIPTION OF THE ADMINISTRATION AGREEMENT --- 8352,8354c8766,8768 ----------------------- < Trust, and the Trust Servicing Agreement sets forth the rights and < duties of the Administrator on behalf of the Trust. The following is < a description of the material terms of the Trust Servicing Agreement. > Trust, and the Administration Agreement sets forth the rights and > duties of the Administrator with respect to the Trust. The following > is a description of the material terms of the Administration Agreement. --- 8361c8775 ----------------------- < The Administrator- > The Administrator - --- 8364,8378d8777 ----------------------- < Qualifications of the Administrator < < The Administrator and any successor administrator must be < (i) a bank, trust company, corporation or national banking association < organized and doing business under the laws of the United States < or any of its states, and authorized under such laws to exercise < corporate trust powers, < (ii) a participant in DTC or such other securities depository as < shall then be acting with respect to the Shares and < (iii), unless counsel to the Sponsor, the appointment of which is < acceptable to the Administrator, determines that such requirement < is not necessary for the exemption under section 408(m)(3)(B) of < the U.S. Internal Revenue Code of 1986, as amended (the "Code"), < to apply to a banking institution as defined in the Code. < --- 8381,8387c8780,8785 ----------------------- < The Trust Servicing Agreement will be in effect for an initial term of < [ ] years from the commencement of the < Trust's operation, the first date on which the Administrator is < entitled to receive fees under the Trust Servicing Agreement. < The Trust Servicing Agreement automatically renews for additional one < (1) year periods thereafter, unless terminated by the Trust or the < Administrator on at least ninety (90) days' prior written notice. > The Administration Agreement will be in effect for an initial term > ending December 31, 2018. The Administration Agreement automatically > renews for additional one (1) year periods thereafter, unless > terminated by the Trust or the Administrator on delivery of written > notice at least ninety (90) days' prior to the expiration of the > initial term or any subsequent one-year term. --- 8391,8402c8789,8796 ----------------------- < The Sponsor may terminate the Trust Servicing Agreement without cause < prior to the end of its initial term by giving at least ninety (90) < days prior written notice. < The Sponsor or the Administrator may terminate the Trust Servicing < Agreement in whole or in part if the Trust Custody Agreement is < terminated. Either the Sponsor or the Administrator may terminate < the Trust Servicing Agreement for cause for the reasons set forth in < the Trust Servicing Agreement, such as either party's bankruptcy or < committing a material breach of the Trust Servicing Agreement. < The Administrator also can terminate the Trust Servicing Agreement < if the Sponsor is more than ninety (90) days delinquent in payments < of monthly billings in connection with the Trust Servicing Agreement. > The Trust or the Administrator may terminate the Administration > Agreement without cause by delivering written notice no later than > ninety (90) days prior to the expiration of the initial term of the > Administration Agreement or any subsequent one-year term. Either the > Trust or the Administrator may terminate the Administration Agreement > for cause for the reasons set forth in the Administration Agreement, > such as either party's bankruptcy or committing a material breach of > the Administration Agreement. --- 8407,8408c8801,8802 ----------------------- < Trust Servicing Agreement, as well as the Administrator's reimbursable < expenses in connection with its services under the Trust Servicing > Administration Agreement, as well as the Administrator's reimbursable > expenses in connection with its services under the Administration --- 8411,8448c8805 ----------------------- < Limitation on Administrator's liability < < The Administrator will not be liable for the disposition of bitcoin < or moneys, or in respect of any valuation or calculation which it < makes under the Trust Servicing Agreement or otherwise, or for any < action taken or omitted or for any loss or injury resulting from its < actions or its performance or lack of performance of its duties under < the Trust Servicing Agreement in the absence of gross negligence, < willful misconduct or bad faith on its part. In no event will the < Administrator be liable for acting in accordance with or conclusively < relying upon any instruction, notice, demand, certificate or document < (i) from the Sponsor or the Custodian or any entity acting on behalf < of either which the Administrator believes is given as authorized by < the Trust Agreement and under the Trust Servicing Agreement or the < Trust Custody Agreement, respectively; or < (ii) from or on behalf of any Authorized Participant which the < Administrator believes is given pursuant to or is authorized by an < Authorized Participant Agreement (provided that the Administrator < has complied with the verification procedures specified in the < Authorized Participant Agreement). In no event will the Administrator < be liable for < < 101 < < Table of Contents < < acting or omitting to act in reliance upon the advice of or information < from legal counsel, accountants or any other person believed by it < in good faith to be competent to give such advice or information. < In addition, the Administrator will not be liable for any delay in < performance or for the non-performance of any of its obligations under < the Trust Agreement and Trust Servicing Agreement by reason of causes < beyond its reasonable control, including acts of God, war or terrorism. < The Administrator will not be liable for any indirect, consequential, < punitive or special damages, regardless of the form of action and < whether or not any such damages were foreseeable or contemplated, < or for an amount in excess of the value of the < Trust's assets. > Standard of Care; Limitation on Administrator's liability --- 8450,8462c8807,8816 ----------------------- < The Administrator will not be not be answerable for the default of < the Trustee or the Custodian or any entity acting on behalf of which < Custodian or any successor custodian of the Trust engaged at the < direction of the Sponsor. < The Administrator may employ agents, attorneys, accountants, auditors < and other professionals and shall not be answerable for the default < or misconduct of any of them if they were selected with reasonable < care. The fees and expenses charged by any successor custodians to the < Trust, agents, attorneys, accountants, auditors or other professionals, < and expenses reimbursable to any successor custodian under a custody < agreement authorized by the Trust Agreement, exclusive of fees for < services to be performed by the Administrator, will be expenses of < the Sponsor or the Trust. > The Administrator is required under the Administration Agreement at > all times to act in good faith and without negligence and has agreed > to exercise the reasonable level of skill, care and diligence expected > of a professional provider of transfer agency services in carrying out > all of its duties and obligations under the Administration Agreement. > The Administrator assumes no responsibility and is not be liable for > loss or damage due to errors, including encoding and payment processing > errors, unless said errors are caused solely by the Administrator's > negligence, bad faith, or willful misconduct or that of its employees > or agents. --- 8466,8487c8820,8825 ----------------------- < The Administrator may delegate to a reputable agent any of its < functions under the Trust Servicing Agreement, although it will < remain responsible under the Trust Servicing Agreement for its < service thereunder. < To the extent reasonably practicable, the Administrator will consult < with the Sponsor before delegating a material portion of such services. < < Taxes < < The Administrator will not be personally liable for any taxes or < other governmental charges imposed upon the < Trust's assets, including bitcoin held in the Trust Custody Account, < moneys or other Trust assets, or on the income therefrom or the gains < or proceeds from the sale thereof, or upon it as Administrator in < respect of the Trust or the Shares, which taxes or charges it may be < required to pay under any present or future law of the United States < of America or of any other taxing authority having jurisdiction. < The Administrator will be reimbursed and indemnified out of the < Trust's assets for all such taxes and charges and for any expenses, < including counsel's fees, which the Administrator may sustain or < incur with respect to such taxes or charges, and the payment of such < amounts shall be secured by a lien on the Trust. > The Administrator may employ or contract with other persons to > assist it in performing its duties under the Administration Agreement, > although the Administrator will remain responsible for the compensation > of such other persons and will be as fully responsible to the Trust > for the acts and omissions of any such persons as it is for its own > acts and omissions. --- 8491,8492c8829,8830 ----------------------- < The Administrator, its directors, employees and agents shall be < indemnified from the Trust and held harmless against any loss, > The Administrator, its directors, officers, employees and agents shall > be indemnified from the Trust and held harmless against any loss, --- 8496,8516c8834,8836 ----------------------- < Trust Servicing Agreement and under each other agreement entered < into by the Administrator in furtherance of the administration of < the Trust (including, without limiting the scope of the foregoing, < any Authorized Participant Agreement) or for any other loss incurred < without gross negligence, willful misconduct or bad faith in connection < with the performance of its obligations under or any actions taken < in accordance with the provisions of the Trust Agreement and Trust < Servicing Agreement or any such other agreement. Such indemnity shall < include payment from the Trust of the costs and expenses incurred < by such indemnified party in defending itself against any claim or < liability in its capacity as Administrator. Any amounts payable to < an indemnified party may be payable in advance or shall be secured < by a lien on the Trust. < < Protection for amounts due to Administrator < < As security for all obligations of the Trust, including those owed < to the Administrator under the Trust Agreement and Trust Servicing < Agreement, the Administrator is granted a continuing security interest < in, and a lien on, the < Trust's assets and all Trust distributions. > Administration Agreement, provided that such losses were not incurred > as a result of actions or omissions of the Administrator, its officers > or employees in cases of their own negligence or willful misconduct. --- 8518c8838 ----------------------- < 102 > 108 --- 8525,8594c8845,8861 ----------------------- < The Administrator may at any time resign as Administrator by written < notice of its election to do so, if such resignation is delivered < to the Sponsor, and such resignation shall take effect upon the < appointment of a successor Administrator and its acceptance of such < appointment. < < The Sponsor may remove the Administrator in its discretion by written < notice delivered to the Administrator at least ninety (90) days prior < to the date of removal. < < The Sponsor may also immediately remove the Administrator at any time < if the Administrator < (i) ceases to be a Qualified Bank, < (ii) is in material breach of its obligations under the Trust Agreement < and Trust Servicing Agreement and fails to cure such breach within < thirty (30) days after receipt of written notice from the Sponsor < or Shareholders acting on behalf of at least twenty-five (25)% of < the outstanding Shares specifying such default and requiring the < Administrator to cure such default, < (iii) fails to consent to the implementation of an amendment to the < Trust's initial Internal Control Over Financial Reporting deemed < necessary by the Sponsor and, after consultations with the Sponsor, < the Sponsor and the Administrator fail to resolve their differences < regarding such proposed amendment or < (iv) fails to consent to the implementation of future regulatory < requirements imposed on Bitcoin or the Trust by U.S. or other < governmental or quasi-governmental regulators. < Under such circumstances, the Sponsor, acting on behalf < of Shareholders, may remove the Administrator by written notice < delivered to the Administrator and such removal shall take effect < upon the appointment of a successor Administrator and its acceptance < of such appointment. < < The Sponsor may also immediately remove the Administrator at any time < if the Administrator merges into, consolidates with or is converted < into another corporation or entity in a transaction in which the < Administrator is not the surviving entity. The surviving entity from < such a transaction shall be the successor of the Administrator without < the execution or filing of any document or any further act; however, < during the ninety (90)-day period following the effectiveness of < such transaction, < the Sponsor may, by written notice to the Administrator, remove the < Administrator and designate a successor administrator. < < If the Administrator resigns or is removed, the Sponsor, acting on < behalf of Shareholders, shall use its reasonable efforts to appoint < a successor administrator, which shall be a Qualified Bank. Every < successor administrator shall execute and deliver to its predecessor < and to the Sponsor, acting on behalf of Shareholders, an instrument < in writing accepting its appointment hereunder, and thereupon such < successor administrator, without any further act or deed, shall become < fully vested with all the rights, powers, duties and obligations of its < predecessor under the Trust Agreement and Trust Servicing Agreement; < but such predecessor, nevertheless, upon payment of all sums due < it and on the written request of the Sponsor, acting on behalf of < Shareholders, shall execute and deliver an instrument transferring to < such successor all rights and powers of such predecessor hereunder, < shall duly assign, transfer and deliver all right, title and interest < in the < Trust's assets to such successor, and shall deliver to such successor < a list of Shareholders of all outstanding Shares. < The Sponsor or any such successor administrator shall promptly < mail notice of the appointment of such successor administrator to < Shareholders. < < If the Administrator resigns and no successor administrator is < appointed within ninety (90) days after the date the Administrator < issues its notice of resignation, < the Sponsor will act to terminate and direct its liquidation and the < distribution of its remaining assets. > Either party may terminate the Administration Agreement by written > notice to the other party delivered no later than ninety (90) days > prior to the end of the Administration Agreement's initial term > or any subsequent one-year term. Either party may terminate the > Administration Agreement: > (i) in the event of the other party's material breach of a material > provision of the Administration Agreement that the other party has > either (a) failed to cure or (b) failed to establish a remedial > plan to cure that is reasonably acceptable, within sixty (60) days' > written notice of such breach, or > (ii) in the event of the appointment of a conservator or receiver > for the other party or upon the happening of a like event to the > other party at the direction of an appropriate agency or court of > competent jurisdiction. > Additionally, the Administrator may terminate the Administration > Agreement immediately upon notice to the Trust in the event it is > required to do so by a regulator with authority over the Administrator. --- 8598,8599c8865,8866 ----------------------- < The Trust Servicing Agreement is governed by New York law. < The Administrator and the Sponsor both consent to the non-exclusive > The Administration Agreement is governed by New York law. > The Administrator and the Sponsor both consent to the exclusive --- 8601,8603c8868 ----------------------- < courts located in the borough of Manhattan in New York City. Such < consent is not required for any person to assert a claim of New York < jurisdiction over the Administrator or the Sponsor. > courts located in the Southern District of New York. --- 8605c8870 ----------------------- < 103 > 109 --- 8609c8874 ----------------------- < DESCRIPTION OF THE TRUST AGENCY SERVICE PROVIDER AGREEMENT > DESCRIPTION OF THE TRANSFER AGENCY AND SERVICES AGREEMENT --- 8611,8626c8876,8889 ----------------------- < The Trust Agreement establishes the role of the Administrator to the < Trust, and the Trust Agency Service Provider Agreement sets forth < the rights and duties of the Administrator on behalf of the Trust < acting in the capacity of the Trust Agency Service Provider (when < acting in such capacity, the Administrator shall be referred to as the < "Trust Agency Service Provider"). The following is a description of < the material terms of the Trust Agency Service Provider Agreement. < < The Trust Agency Service Provider, provides transfer agent and < related services with respect to the issuance and redemption of the < Shares recording the issuance of the Shares and maintaining certain < records therewith. < The Trust Agency Service Provider coordinates with the Custodian < to provide services with respect to the processing, clearance and < settlement of creation and redemption orders for the Shares through < the DTC. > The Administration Agreement establishes the role of the Administrator > to the Trust, and the Transfer Agency and Services Agreement sets > forth the rights and duties of the Administrator on behalf of the > Trust acting in the capacity of the Transfer Agent (when acting in > such capacity, the Administrator shall be referred to as the "Transfer > Agent"). The following is a description of the material terms of the > Transfer Agency and Services Agreement. > > The Transfer Agent provides transfer agent and related services with > respect to the issuance and redemption of the Shares recording the > issuance of the Shares and maintaining certain records therewith. The > Transfer Agent coordinates with the Custodian to provide services > with respect to the processing, clearance and settlement of creation > and redemption orders for the Shares through the DTC. --- 8628c8891 ----------------------- < Qualifications of the Trust Agency Service Provider > Qualifications of the Transfer Agent --- 8630,8631c8893 ----------------------- < The Trust Agency Service Provider and any successor agency service < provider must be > The Transfer Agent and any successor agency service provider must be --- 8635c8897 ----------------------- < corporate trust powers, > corporate trust powers and --- 8637,8642c8899 ----------------------- < shall then be acting with respect to the Shares and < (iii), unless counsel to the Sponsor, the appointment of which is < acceptable to the Trust Agency Service Provider, determines that < such requirement is not necessary for the exemption under section < 408(m)(3)(B) of the Code, to apply to a banking institution as defined < in the Code. > shall then be acting with respect to the Shares. --- 8646,8654c8903,8908 ----------------------- < The Trust Agency Service Provider Agreement will be in effect for an < initial term of [ ] years from the commencement of the < Trust's operation, the first date on which the Trust Agency Service < Provider is entitled to receive fees under the Trust Agency Service < Provider Agreement. < The Trust Agency Service Provider Agreement automatically renews < for additional one (1) year periods thereafter, unless terminated by < the Trust or the Administrator on at least ninety (90) days' prior < written notice. > The Transfer Agency and Services Agreement will be in effect for > an initial term ending December 31, 2018. The Transfer Agency and > Services Agreement automatically renews for additional one (1) year > periods thereafter, unless terminated by the Trust or the Transfer > Agent by written notice delivered no later than ninety (90) days prior > to the expiration of the initial term or any subsequent one year term. --- 8658,8676c8912,8929 ----------------------- < The Sponsor may terminate the Trust Agency Service Provider Agreement < without cause prior to the end of its initial term by giving at least < ninety (90) days prior written notice. < The Sponsor or the Trust Agency Service Provider may terminate the < Trust Agency Service Provider Agreement in whole or in part if the < Trust Agency Service Provider Agreement is terminated. Either the < Sponsor or the Administrator may terminate the Trust Agency Service < Provider Agreement for cause for the reasons set forth in the Trust < Agency Service Provider Agreement, such as either party's bankruptcy < or committing a material breach of the Trust Agency Service Provider < Agreement. < If the Trust Custody Agreement is terminated, the Trust Agency Service < Provider may terminate the Trust Agency Services Provider Agreement < in whole or in part simultaneously with the transition of assets to < a successor custodian, if any. < The Trust Agency Service Provider also can terminate the Trust Agency < Service Provider Agreement if the Sponsor is more than ninety (90) < days delinquent in payments of monthly billings in connection with < the Trust Agency Service Provider Agreement. > Either party may terminate the Transfer Agency and Services Agreement > by written notice to the other party delivered no later than ninety > (90) days prior to the end of the Administration Agreement's initial > term or any subsequent one-year term. Either party may terminate the > Transfer Agency and Services Agreement: > (i) in the event of the other party's material breach of a material > provision of the Transfer Agency and Services Agreement that the > other party has either (a) failed to cure or (b) failed to establish > a remedial plan to cure that is reasonably acceptable, within sixty > (60) days' written notice of such breach, or > (ii) in the event of the appointment of a conservator or receiver > for the other party or upon the happening of a like event to the > other party at the direction of an appropriate agency or court of > competent jurisdiction. > Additionally, the Transfer Agent may terminate the Transfer Agency > and Services Agreement immediately upon notice to the Trust in the > event it is required to do so by a regulator with authority over the > Transfer Agent. --- 8680,8683c8933,8946 ----------------------- < The Sponsor will pay the Trust Agency Service Provider for its services < under the Trust Agency Service Provider Agreement, as well as the < Trust Agency Service Provider's reimbursable expenses in connection < with its services under the Trust Agency Service Provider Agreement. > The Sponsor will pay the Transfer Agent for its services under the > Transfer Agency and Services Agreement, as well as the Transfer > Agent's reimbursable expenses in connection with its services under > the Transfer Agency and Services Agreement. > > Standard of Care; Limitation on Transfer Agent's liability > > The Transfer Agent is required under the Transfer Agency and Services > Agreement at all times to act in good faith and without negligence > and has agreed to exercise the reasonable level of skill, care and > diligence expected of a professional provider of transfer agency > services in carrying out all of its duties and obligations under the > Transfer Agency and Services Agreement. The Transfer Agent assumes > no responsibility and is not be --- 8685c8948 ----------------------- < 104 > 110 --- 8689,8747c8952,8972 ----------------------- < Limitation on Trust Agency Service Provider's liability < < The Trust Agency Service Provider will not be liable for the < disposition of bitcoin or moneys, or in respect of any calculation < which it makes under the Trust Agency Service Provider Agreement < or otherwise, or for any action taken or omitted or for any loss < or injury resulting from its actions or its performance or lack of < performance of its duties under the Trust Agency Service Provider < Agreement in the absence of gross negligence, willful misconduct or < bad faith on its part. In no event will the Trust Agency Service < Provider be liable for acting in accordance with or conclusively < relying upon any instruction, notice, demand, certificate or document < (i) from the Sponsor, the Administrator or the Custodian or any entity < acting on behalf of any of them which the Trust Agency Service Provider < believes is given as authorized by the Trust Agreement, the Trust < Servicing Agreement or the Trust Custody Agreement, respectively; or < (ii) from or on behalf of any Authorized Participant which the < trust Agency Service Provider believes is given pursuant to or is < authorized by an Authorized Participant Agreement (provided that < the Trust Agency Service Provider has complied with the verification < procedures specified in the Authorized Participant Agreement). In no < event will the Trust Agency Service Provider be liable for acting or < omitting to act in reliance upon the advice of or information from < legal counsel, accountants or any other person believed by it in good < faith to be competent to give such advice or information. < In addition, the Trust Agency Service Provider will not be liable < for any delay in performance or for the non-performance of any of < its obligations under the Trust Agency Service Provider Agreement by < reason of causes beyond its reasonable control, including acts of God, < war or terrorism. < The Trust Agency Service Provider will not be liable for any indirect, < consequential, punitive or special damages, regardless of the form < of action and whether or not any such damages were foreseeable or < contemplated, or for an amount in excess of the value of the < Trust's assets. < < The Administrator will not be not be answerable for the default of < the Trustee, the Administrator or the Custodian or any entity acting < on behalf of which Custodian or any successor custodian of the Trust < engaged at the direction of the Sponsor. < The Trust Agency Service provider may employ agents, attorneys, < accountants, auditors and other professionals and shall not be < answerable for the default or misconduct of any of them if they were < selected with reasonable care. The fees and expenses charged by any < successor custodians to the Trust, agents, attorneys, accountants, < auditors or other professionals, and expenses reimbursable to any < successor custodian under a custody agreement authorized by the Trust < Agreement, exclusive of fees for services to be performed by the Trust < Agency Service Provider, will be expenses of the Sponsor or the Trust. < < Trust Agency Service Provider's liability for agents < < The Trust Agency Service Provider may delegate to a reputable agent any < of its functions under the Trust Agency Service Provider Agreement, < although it will remain responsible under the Trust Agency Service < Provider Agreement for its service thereunder. < To the extent reasonably practicable, the Trust Agency Service Provider < will consult with the Sponsor before delegating a material portion < of such services. > liable for loss or damage due to errors, including encoding and > payment processing errors, unless said errors are caused solely by > the Transfer Agent's negligence, bad faith, or willful misconduct or > that of its employees or agents. > > Transfer Agent's liability for agents > > The Transfer Agent may employ or contract with other persons to assist > it in performing its duties under the Transfer Agency and Services > Agreement without the consent of the Trust. The Transfer Agent remains > responsible for the compensation of such other persons and for the > acts and omissions of any such person or persons to same extent > as it is for its own acts and omissions under the Trust Agency and > Services Agreement. The Transfer Agent may also, without the consent > of the Trust, subcontract for the performance of its duties under the > Transfer Agency and Services Agreement with a transfer agent which > is duly registered according to the terms of the Transfer Agency and > Services Agreement. The Transfer Agent remains responsible for the > compensation of any such subcontractor and for the acts and omissions > of any such subcontractor to the same extent as it is for its own > acts and omissions. --- 8751,8797c8976,9001 ----------------------- < The Trust Agency Service Provider will not be personally liable for < any taxes or other governmental charges imposed upon the < Trust's assets, including bitcoin held in the Trust Custody Account, < moneys or other Trust assets, or on the income therefrom or the gains < or proceeds from the sale thereof, or upon it as Trust Agency Service < Provider in respect of the Trust or the Shares, which taxes or charges < it may be required to pay under any present or future law of the United < States of America or of any other taxing authority having jurisdiction. < The Trust Agency Service Provider will be reimbursed and indemnified < out of the < Trust's assets for all such taxes and charges and for any expenses, < including counsel's fees, which the Trust Agency Service Provider < may sustain or incur with respect to such taxes or charges, and the < payment of such amounts shall be secured by a lien on the Trust. < < 105 < < Table of Contents < < Indemnification of the Trust Agency Service Provider < < The Trust Agency Service Provider, its directors, employees and agents < shall be indemnified by the Trust and held harmless against any loss, < liability or expense (including, but not limited to, the reasonable < fees and expenses of counsel) arising out of or in connection with < the performance of its obligations under the Trust Agreement and the < Trust Agency Service Provider Agreement and under each other agreement < entered into by the Trust Agency Service Provider in furtherance < of the administration of the Trust (including, without limiting the < scope of the foregoing, any Authorized Participant Agreement) or for < any other loss incurred without gross negligence, willful misconduct < or bad faith in connection with the performance of its obligations < under or any actions taken in accordance with the provisions of the < Trust Agreement and Trust Agency Service Provider Agreement or any such < other agreement. Such indemnity shall include payment from the Trust of < the costs and expenses incurred by such indemnified party in defending < itself against any claim or liability in its capacity as Trust Agency < Service Provider. Any amounts payable to an indemnified party may be < payable in advance or shall be secured by a lien on the Trust. < < Protection for amounts due to Trust Agency Service Provider < < As security for all obligations of the Trust, including those owed < to the Trust Agency Service Provider under the Trust Agency Service < Provider Agreement, the Trust Agency Service Provider is granted a < continuing security interest in, and a lien on, the < Trust's assets and all Trust distributions. > The Transfer Agent will not be personally liable for any taxes or other > governmental charges imposed upon the Trust, any Baskets, any Shares, > a beneficial owner thereof, an Authorized Participant, or the Transfer > Agent in connection with the services provided by the Transfer Agent > under the terms of the Transfer Agency and Services Agreement. The > Transfer Agent will be reimbursed and indemnified out of the > Trust's assets for any tax obligations under the tax laws of any > country or of any state or political subdivision thereof, including > taxes, withholding and reporting requirements, claims for exemption > and refund, additions for late payment, interest, penalties and other > expenses (including reasonable legal expenses) that may be assessed, > imposed or charged against the Transfer Agent in connection with the > Transfer Agency and Services Agreement. > > Indemnification of the Transfer Agent > > The Transfer Agent and its agents and subcontractors shall be > indemnified by the Trust and held harmless against any loss, liability > or expense (including, but not limited to, the reasonable fees of > counsel) arising out of or in connection with the performance of its > obligations under the Trust Agreement and the Transfer Agency and > Services Agreement incurred without negligence, willful misconduct or > bad faith. Such indemnity shall include payment from the Trust of the > costs and expenses incurred by such indemnified party in defending > itself against any lawsuit in which the Transfer Agent or affiliate > is a named party. --- 8801,8808c9005,9008 ----------------------- < The Trust Agency Service Provider Agreement is governed by New < York law. < The Trust Agency Service Provider and the Sponsor both consent to the < non-exclusive jurisdiction of the courts of the State of New York and < the federal courts located in the borough of Manhattan in New York < City. Such consent is not required for any person to assert a claim < of New York jurisdiction over the Trust Agency Service Provider or < the Sponsor. > The Transfer Agency and Services Agreement is governed by New York > law. The Transfer Agent and the Trust both consent to the exclusive > jurisdiction of the courts of the State of New York and the federal > courts located in the Southern District of New York. --- 8810c9010 ----------------------- < 106 > 111 --- 8816,8820c9016,9020 ----------------------- < The Trust Agreement establishes the role of the Custodian and the Trust < Custody Account, which is maintained and operated by the Custodian on < behalf of the Trust pursuant to the provisions of the Trust Custody < Agreement. For a general description of the Custodian's obligations, < see " > The Trust Custody Agreement establishes the role of the Custodian and > the Trust Custody Account, which is maintained and operated by the > Custodian on behalf of the Trust pursuant to the provisions of the > Trust Custody Agreement. For a general description of the Custodian's > obligations, see " --- 8852,8853c9052,9056 ----------------------- < The Custodian will arrange for its policies and procedures as well as < "proof of control" to be audited periodically by an external auditor. > The Custodian will arrange for all data, materials and information, > including records, books, accounts, memoranda, files and any other > documents, reasonably related to the Custodian's Cold Storage System > protocols and internal controls to be audited by an independent > auditor. --- 8881,8882c9084 ----------------------- < Authorized Participant Agreements and the Administrator's written < instructions. > Authorized Participant Agreements and the Custodian Agreement. --- 8892,8894c9094 ----------------------- < or other transfers permitted under the Trust Agreement. Transfers < made pursuant to clause < (iii) are expected to include transfers > or other transfers permitted under the Trust Agreement. --- 8896c9096 ----------------------- < 107 > 112 --- 8900,8905c9100,9106 ----------------------- < made in connection with a sale of bitcoin to pay expenses of the Trust < not assumed by the Sponsor or with the liquidation of the Trust. On < days in which there are both deposits into and withdrawals from the < Trust Custody Account, the Custodian may make distributions with < deposited bitcoin, without first transferring such bitcoin into the < Trust Custody Account or Cold Storage System. > Transfers made pursuant to clause > (iii) may include transfers made in connection with a sale of bitcoin > to pay expenses of the Trust not assumed by the Sponsor or with the > liquidation of the Trust. On days in which there are both deposits > into and withdrawals from the Trust Custody Account, the Custodian may > make distributions with deposited bitcoin, without first transferring > such bitcoin into the Trust Custody Account or Cold Storage System. --- 8911c9112 ----------------------- < of the Administrator, such instructions are in improper form, or such > of the Custodian, such instructions are not in proper form, or such --- 8924,8925c9125,9127 ----------------------- < systems relating to bitcoin that the Custodian, Administrator or the < Sponsor believes would enhance the Custodian's ability to secure the > systems relating to bitcoin that the Custodian, the Administrator > or the Sponsor believes would enhance the Custodian's ability to > secure the --- 8930a9133,9159 ----------------------- > Hard Fork > > In the event of an upcoming modification to the Bitcoin Network > that could potentially result in a hard fork with two separate and > incompatible Bitcoin Networks, the Custodian, in consultation with > the Sponsor, will elect to support the Bitcoin Network that has the > greatest cumulative computational difficulty for the forty-eight (48) > hour period following a given hard fork, in order to engage in bitcoin > transactions and the valuation of bitcoin. Creation and redemption of > baskets will be halted during this forty-eight (48) hour period and > for the twenty-four (24) hour period prior to the anticipated hard > fork. The greatest cumulative computational difficulty is defined > as the total threshold number of hash attempts required to mine all > existing blocks in the respective Blockchain, accounting for potential > differences in relative hash difficulty. > If the Custodian, in consultation with the Sponsor, is unable to > make a conclusive determination about which Bitcoin Network has the > greatest cumulative computational difficulty after forty-eight hours, > or determines in good faith that this is not a reasonable criterion > upon which to make an election, the Custodian will support the Bitcoin > Network which it deems in good faith is most likely to be supported > by a majority of users and miners. > Under the terms of the Trust Custody Agreement, the Trust may > be required to indemnify the Custodian for any losses arising in > connection with its determination to elect the Bitcoin Network with > the greatest computational difficulty in the event of a hard fork. > --- 8933,8937c9162,9168 ----------------------- < The Custodian will maintain daily reports for each Business Day < identifying the transfers of bitcoin into and out of the Trust < Custody Account and containing sufficient information to account < for the bitcoin held in the Trust Custody Account and provide such < reports to the Administrator each Business Day. > The Custodian will produce and transmit to the Administrator sufficient > information to account for the bitcoin held in the Trust Custody > Account and calculate the > Trust's net asset value per Share, including the end of Business Day > balance of the Trust Custody Account and the movement of bitcoin > into and out of the Trust Custody Account, identifying separately > each transaction. --- 8941,8944c9172,9176 ----------------------- < The Custodian's records of all transfers of bitcoin into and out of < the Trust Custody Account which are to occur on a Business Day, and < all end of Business Day account balances in the Trust Custody Account, < are stated as of [ ], Eastern time on such Business Day. > The Custodian's records of all transfers of bitcoin into and out > of the Trust Custody Account which are to occur on a Business Day, > and all end of Business Day account balances in the Trust Custody > Account, are stated as of the completion of all creation and redemption > transactions on such Business Day. --- 8949,8953c9181,9190 ----------------------- < custodial duties under the Trust Custody Agreement and the Authorized < Participant Agreements and will only be responsible for any loss < or damage suffered by the Trust as a direct result of any gross < negligence, willful misconduct or bad faith in the performance of < its duties. > custodial duties under the Trust Custody Agreement and will only be > responsible for any loss or damage suffered by the Trust as a direct > result of > > 113 > > Table of Contents > > any fraud, gross negligence, willful misconduct, or bad faith in the > performance of its duties. --- 8955,8959c9192,9197 ----------------------- < Custody Agreement and the Authorized Participant Agreements is further < limited to the market value of the bitcoin lost or damaged at the time < such gross negligence, willful misconduct or bad faith is discovered < by the Custodian, provided that the Custodian promptly notifies the < Administrator and the Sponsor of its discovery. > Custody Agreement is further limited to the market value of the > bitcoin lost or damaged at the time such fraud, gross negligence, > willful misconduct, or bad faith is discovered by the Custodian, the > Sponsor or the Administrator, provided that the Custodian notifies, > as soon as reasonably practicable after obtaining knowledge of such > matter, the Sponsor of its discovery. --- 8969,8976c9207,9210 ----------------------- < connection with its custodial operations under the Trust Agreement, < the Trust Custody Agreement and the Authorized Participant Agreements, < except to the extent that such sums are due directly to the Custodian's < gross negligence, willful misconduct or bad faith. < < 108 < < Table of Contents > connection with its custodial operations under the Trust Agreement > and the Trust Custody Agreement, except to the extent that such sums > are due directly to the Custodian's fraud, gross negligence, willful > misconduct, or bad faith. --- 8982,8983c9216,9217 ----------------------- < Custody Agreement by reason of any cause beyond its reasonable control, < including acts of God, war or terrorism. > Custody Agreement as a result of any cause beyond its reasonable > control, including acts of God, war or terrorism. --- 8987,8989c9221,9222 ----------------------- < The Trust Custody Agreement has an initial term of [ ] years, subject < to certain termination provisions discussed in " < Description of the Trust Custody Agreement." > The Trust Custody Agreement has an initial term of two years, subject > to certain termination provisions discussed below. --- 9002,9004c9235,9236 ----------------------- < (ii) by the Custodian or the Sponsor, if it becomes unlawful for the < Custodian to have entered into the agreement or to provide or receive < the services thereunder; > (ii) by the Custodian or the Sponsor, if required to do so by > applicable law; --- 9008c9240 ----------------------- < Custodian is insolvent or faces impending insolvency; or > Custodian is insolvent or faces impending insolvency; --- 9010c9242,9253 ----------------------- < ceases to be in full force and effect. > ceases to be in full force and effect; > (v) by the Sponsor, if the Custodian is not the surviving entity > following any merger, consolidation or conversion of the Custodian; > (vi) by the Sponsor, if the Sponsor, in its sole discretion, determines > to terminate the Trust; > (vii) by the Sponsor, if the Custodian fails to maintain adequate > capital requirement in accordance with the terms of the Trust Custody > Agreement or > (viii) by the Custodian or the Sponsor, if, having received notice > of a material breach of the other party's obligations under the Trust > Custody Agreement, if the other party has not cured the breach within > sixty (60) days. --- 9030,9040c9273,9275 ----------------------- < In the event that the Sponsor determines that the maintenance of all < or some of the < Trust's bitcoin with a particular custodian is not in the best < interests of Shareholders, < the Sponsor will direct the Administrator to initiate action to remove < such bitcoin from the custody of such custodian or take such other < action as the Administrator determines appropriate to safeguard the < interests of Shareholders. < The Administrator shall have no liability for any such action taken < at the direction of the Sponsor or, in the absence of such direction, < any action taken by it in good faith. > 114 > > Table of Contents --- 9042c9277 ----------------------- < Governing Law; consent to New York jurisdiction > Governing law; consent to New York jurisdiction --- 9047,9049c9282 ----------------------- < courts located in the borough of Manhattan in New York City. Such < consent is not required for any person to assert a claim of New York < jurisdiction over the Custodian or the Sponsor. > courts located in the borough of Manhattan in New York City. --- 9051c9284 ----------------------- < 109 > 115 --- 9129c9362 ----------------------- < is an individual, corporation, estate or trust and that is not a > is an individual, corporation, estate, or trust and that is not a --- 9134c9367 ----------------------- < U.S. federal income tax purposes, will generally depend upon the status > U.S. federal income tax purposes will generally depend upon the status --- 9138c9371 ----------------------- < 110 > 116 --- 9152,9153c9385,9387 ----------------------- < and the Administrator will report the < Trust's income, gains, losses and deductions to the IRS on that basis. > and the > Trust's income, gains, losses and deductions will be reported to the > IRS on that basis. --- 9166,9172c9400,9409 ----------------------- < is not currency for U.S. federal income tax purposes and clarifies < that bitcoin can be held as capital assets. The guidance further < states that general tax principles applicable to property transactions < apply to transactions using bitcoin. Therefore, a person that holds < bitcoin as capital assets and sells the bitcoin or transfers bitcoin < in exchange for other property or services may recognize a capital < gain or loss upon such sale or transfer. > is not currency for U.S. federal income tax purposes and clarifies that > bitcoin can be held as capital assets. The guidance further states that > general tax principles applicable to property transactions apply to > transactions using bitcoin. Therefore, a person that holds bitcoin as > capital assets and sells the bitcoin or transfers bitcoin in exchange > for other property or services may recognize a capital gain or loss > upon such sale or transfer. The IRS also clarified that bitcoin > received as payment (e.g., as wages or, in the case of a miner, as > a reward for solving a block) is included in the recipient's taxable > income based on the fair market value of bitcoin when received. --- 9221,9224c9458 ----------------------- < fraction, the numerator of which is the number of bitcoin sold < or transferred, and the denominator of which is the total number < of the bitcoin held by the Trust immediately prior to the sale or < transfer. After any such sale or transfer, a > fraction, --- 9226c9460 ----------------------- < 111 > 117 --- 9230,9233c9464,9471 ----------------------- < Shareholder's tax basis for its pro rata share of the remaining < bitcoin held by the Trust will be equal to its tax basis for its Shares < immediately prior to the sale or transfer, less the portion of such < basis allocable to its share of the bitcoin sold or transferred. > the numerator of which is the number of bitcoin sold or transferred, > and the denominator of which is the total number of the bitcoin held > by the Trust immediately prior to the sale or transfer. After any > such sale or transfer, a Shareholder's tax basis for its pro rata > share of the remaining bitcoin held by the Trust will be equal to its > tax basis for its Shares immediately prior to the sale or transfer, > less the portion of such basis allocable to its share of the bitcoin > sold or transferred. --- 9246c9484 ----------------------- < to the Shares sold, exchanged or disposed of. > to the Shares sold, exchanged, or disposed of. --- 9284c9522 ----------------------- < are transferred by the Administrator to pay Trust expenses. > are transferred by the Sponsor to pay Trust expenses. --- 9299,9302c9537,9540 ----------------------- < The Administrator, Trust Agency Service Provider or the appropriate < broker will file certain information returns with the IRS, and provide < certain tax-related information to Shareholders, in accordance with < applicable Treasury Regulations. > The Administrator, Transfer Agent, or the appropriate broker will > file certain information returns with the IRS, and provide certain > tax-related information to Shareholders, in accordance with applicable > Treasury Regulations. --- 9307c9545 ----------------------- < 112 > 118 --- 9349c9587 ----------------------- < 113 > 119 --- 9376c9614 ----------------------- < under the appropriate governing plan instrument, > under the appropriate governing plan instrument; --- 9378,9379c9616,9617 ----------------------- < non-exempt prohibited transaction with a party in interest, < (iii) the Plan's funding objectives, and > non-exempt prohibited transaction with a party in interest; > (iii) the Plan's funding objectives;, and --- 9396c9634 ----------------------- < or 12(g) of the Exchange Act, or > or 12(g) of the Exchange Act or --- 9421c9659 ----------------------- < 114 > 120 --- 9456c9694 ----------------------- < Investors that purchase the Shares through a commission/fee-based > Investors who purchase Shares through a commission/fee-based --- 9468,9475c9706,9712 ----------------------- < The Sponsor intends to qualify the Shares in states selected by the < Sponsor and that sales be made through broker-dealers who are members < of FINRA. Investors intending to create or redeem Baskets through < Authorized Participants in transactions not involving a broker-dealer < registered in such investor's state of domicile or residence should < consult their legal advisor regarding applicable broker-dealer or < securities regulatory requirements under the state securities laws < prior to such creation or redemption. > The Sponsor intends that sales be made through broker-dealers who are > members of FINRA. Investors intending to create or redeem Baskets > through Authorized Participants in transactions not involving a > broker-dealer registered in such investor's state of domicile or > residence should consult their legal advisor regarding applicable > broker-dealer or securities regulatory requirements under the state > securities laws prior to such creation or redemption. --- 9477c9714 ----------------------- < On [ ], 2016, the Initial Purchaser purchased [ ] Shares which > On [ ], 2017, the Initial Purchaser purchased [ ] Shares which --- 9480,9485c9717,9722 ----------------------- < depending on, among other factors, the Gemini Exchange Spot Price and < the trading price of the Shares on Bats. The Initial Purchaser will < not receive a fee, or any other form of compensation or inducement < from either the Sponsor or the Trust, and no Initial Purchaser has < any obligation or responsibility to the Sponsor or the Trust to effect < any sale or resale of the Shares. > depending on, among other factors, > the Gemini Exchange Auction Price and the trading price of the Shares > on Bats. The Initial Purchaser will not receive a fee, or any other > form of compensation or inducement from either the Sponsor or the > Trust, and no Initial Purchaser has any obligation or responsibility > to the Sponsor or the Trust to effect any sale or resale of the Shares. --- 9500c9737 ----------------------- < 115 > 121 --- 9509c9746,9748 ----------------------- < The Shares will be listed and trade on Bats under the symbol "COIN." > The Shares will be listed on Bats under the symbol "COIN." Additional > information about the Shares may be found on the > Trust's website, www.coin-etf.com. --- 9511c9750 ----------------------- < 116 > 122 --- 9517,9520c9756,9760 ----------------------- < The validity of the Shares will be passed upon for the Sponsor by Ropes < & Gray LLP, Boston, Massachusetts, who will also render an opinion, < subject to certain limitations and qualifications, regarding the < material U.S. federal income tax consequences relating to the Shares. > The validity of the Shares will be passed upon for the Sponsor by > Richards, Layton & Finger, P.A., Wilmington, Delaware. Ropes & Gray > LLP, Boston, Massachusetts, will render an opinion, subject to certain > limitations and qualifications, regarding the material U.S. federal > income tax consequences relating to the Shares. --- 9524,9528c9764,9768 ----------------------- < The financial statement included in this prospectus has been audited < by [AUDITOR], an independent registered public accounting firm, as < stated in their report appearing herein. Such financial statement is < included in reliance upon the report of such firm given upon their < authority as experts in accounting and auditing. > The financial statement included in this prospectus has been audited by > BPM LLP (the "Auditor"), an independent registered public accounting > firm, as stated in their report appearing herein. Such financial > statement is included in reliance upon the report of such firm given > upon their authority as experts in accounting and auditing. --- 9545c9785 ----------------------- < Trust's website is www.[ ].com. > Trust's website is www.coin-etf.com. --- 9565c9805 ----------------------- < 117 > 123 --- 9574,9575c9814,9821 ----------------------- < "Administrator"-[ ], a [ ], serves as the Administrator to the Trust < under the Trust Servicing Agreement. > "Administration Agreement"-The Agreement between Sponsor and the > Administrator which sets forth the obligations and responsibilities > of the Administrator with respect to the operation and administration > of the Trust. > > "Administrator" -State Street Bank and Trust Company, a trust company > organized under the laws of the Commonwealth of Massachusetts, serves > as the Administrator to the Trust under the Administration Agreement. --- 9581,9584c9827,9831 ----------------------- < transactions, < (ii) is a direct participant in the DTC, and < (iii) has entered into an Authorized Participant Agreement with the < Administrator and the Sponsor. > transactions; > (ii) is a direct participant in the DTC; and > (iii) has entered into an Authorized Participant Agreement with > the Sponsor on behalf of the Trust, subject to acceptance by the > Transfer Agent. --- 9590,9591c9837,9838 ----------------------- < "Authorized Participant Agreement"-An agreement entered into by < an Authorized Participant, the Sponsor and the Administrator which > "Authorized Participant Agreement"-An agreement entered into by an > Authorized Participant, and the Sponsor on behalf of the Trust which --- 9596c9843,9844 ----------------------- < "Basket"-A block of 50,000 Shares. > "Basket"-A block of 100,000 Shares (or such other number of Shares > that the Trust shall determine from time to time). --- 9634a9883,9886 ----------------------- > 124 > > Table of Contents > --- 9644,9647d9895 ----------------------- < 118 < < Table of Contents < --- 9653,9655d9900 ----------------------- < The Sponsor will license the Cold Storage System for use by the Trust < and its service providers in management and custody of the < Trust's bitcoin. --- 9663,9664c9908,9909 ----------------------- < "Creation Basket"- An order placed by an Authorized Participant < with the Administrator to create one or more Baskets. The number of > "Creation Basket"-An order placed by an Authorized Participant with > the Transfer Agent to create one or more Baskets. The number of --- 9666c9911,9912 ----------------------- < equivalent of the net asset value of 50,000 Shares. > equivalent of the net asset value of 100,000 Shares (or such other > amount as determined by the Trust from time to time). --- 9668c9914 ----------------------- < "Custodian"- Gemini Trust Company, LLC, a New York State-chartered > "Custodian"-Gemini Trust Company, LLC, a New York State-chartered --- 9696c9942 ----------------------- < "Exchange Act"-The Securities Exchange Act of 1934, as amended. > "Exchange Act" -The Securities Exchange Act of 1934, as amended. --- 9700c9946 ----------------------- < Trust's NAV, which time is as of 4:00 p.m., Eastern time, on each > Trust's NAV, which time is as of 4:00 p.m. Eastern Time, on each --- 9707a9954,9957 ----------------------- > 125 > > Table of Contents > --- 9712,9718c9962,9975 ----------------------- < "Gemini Exchange Spot Price"- < The price of a bitcoin on the Gemini Exchange as of 4:00 p.m. Eastern < time on each Business Day. < < 119 < < Table of Contents > "General Direct Action"'-An action, suit or other proceeding > asserting a direct claim of any nature whatsoever (regardless of > whether such claim > (i) sounds in contract, tort, fraud or otherwise or > (ii) is based on common law, statutory, equitable, legal or other > grounds) where the harm alleged falls upon all Shareholders (and not > an individual harm only to the Shareholder or Shareholders bringing > such action, suit or other proceeding) on a pro rata basis and/or > proportionally based on their interests in the Trust. > > "Gemini Exchange Auction Price"- > The price of one (1) bitcoin on the Gemini Exchange as of 4:00 > p.m. Eastern Time on each Business Day as determined by the daily > two-sided auction. --- 9746,9748c10003,10006 ----------------------- < as of 4:00 p.m. Eastern time each Business Day. < The Administrator will calculate the NAV using the Gemini Exchange < Spot Price. > as of 4:00 p.m. Eastern Time each Business Day. > The Administrator will calculate the NAV using > the Gemini Exchange Auction Price, which will be provided to the > Administrator by the Sponsor. --- 9756c10014 ----------------------- < the Administrator to redeem one or more Baskets. > the Transfer Agent to redeem one or more Baskets. --- 9759c10017,10018 ----------------------- < 50,000 Shares on a given day. > 100,000 Shares on a given day (or such other amount as determined by > the Trust from time to time). --- 9765c10024 ----------------------- < "Seed Baskets"-The [ ] Baskets issued and sold to the Initial Purchaser > "Seed Baskets"-The [_] Baskets issued and sold to the Initial Purchaser --- 9774a10034,10037 ----------------------- > 126 > > Table of Contents > --- 9790,9802c10053,10060 ----------------------- < The Sponsor's Fee will accrue daily in U.S. Dollars and will be < payable in kind (in bitcoin) according to the Gemini Exchange Spot < Price monthly in arrears by the transfer of bitcoin from the Trust < Custody Account to the Sponsor Custody Account. < < 120 < < Table of Contents < < "Transaction Fee"-The non-refundable transaction fee that may be < required to be paid by Authorized Participants to the Trust Agency < Service Provider when placing a Creation Basket order or a Redemption < Basket order. > The Sponsor's Fee will accrue daily in bitcoin and will be payable > in kind (in bitcoin) according to > the Gemini Exchange Auction Price monthly in arrears by the transfer of > bitcoin from the Trust Custody Account to the Sponsor Custody Account. > > "Transaction Fee"-The nonrefundable transaction fee that may be > required to be paid by Authorized Participants to the Transfer Agent > when placing a Creation Basket order or a Redemption Basket order. --- 9808,9815c10066,10074 ----------------------- < "Trust Agency Service Provider-[ ], a [ ], serves as Trust Agency < Service Provider to the Trust under the Trust Agency Service Provider < Agreement. < < "Trust Agency Service Provider Agreement-The agreement between the < Sponsor and the Trust Agency Service Provider which sets forth the < obligations and responsibilities of the Trust Agency Service Provider < with respect to transfer agency services and related matters. > "Transfer Agent-State Street Bank and Trust Company, a trust company > organized under the laws of the Commonwealth of Massachusetts, > serves as Transfer Agent to the Trust under the Transfer Agency and > Services Agreement. > > "Transfer Agency and Services Agreement- The agreement between the > Sponsor and the Transfer Agent which sets forth the obligations and > responsibilities of the Transfer Agent with respect to transfer agency > services and related matters. --- 9817,9818c10076,10077 ----------------------- < "Trust Agreement"- < The Trust Agreement between the Sponsor and the Trustee under which the > "Trust Agreement"-The Amended and Restated Declaration of Trust and > Trust Agreement between the Sponsor and the Trustee under which the --- 9832,9842c10091,10094 ----------------------- < "Trust Expense Account"-The segregated bitcoin account of the < Administrator to which the Custodian will transfer bitcoin from < the Trust Custody Account in order to permit the Administrator pay < expenses of the Trust not assumed by the Sponsor. < The Trust Expense Account is established pursuant to the Trust < Agreement and the Trust Servicing Agreement. < < "Trust Servicing Agreement"-The Agreement between Sponsor and the < Administrator which sets forth the obligations and responsibilities < of the Administrator with respect to the operation and administration < of the Trust. > "Trust Expense Account"--The segregated bitcoin account of the Trust > to which the Custodian will transfer bitcoin from the Trust Custody > Account in order to pay extraordinary expenses of the Trust not > assumed by the Sponsor. --- 9846c10098 ----------------------- < 121 > 127 --- 9862c10114 ----------------------- < STATEMENT OF FINANCIAL CONDITION > STATEMENT OF ASSETS AND LIABILITIES --- 9864c10116 ----------------------- < [ ], 2016 > [ ], 2017 --- 9868c10120,10121 ----------------------- < Bitcoin inventory (fair value $[ ]) > Investment in Bitcoin, at fair value ( > See Note 2(C)) (cost $[ ]) --- 9874c10127 ----------------------- < Liabilities and Shareholder's Equity Liabilities: > Liabilities: --- 9877c10130,10142 ----------------------- < - > $ [ ] > > Net Assets: > $ [ ] > > Shares issued and outstanding(1) > $ [ ] > > Net asset value per Share > $ [ ] > > (1) Authorized Share capital is unlimited, and the par value of the > Shares is $0.00. --- 9879,9880c10144,10177 ----------------------- < Commitments and Contingent Liabilities (Note 6) < - > The accompanying notes are an integral part of these financial > statements. > > F-2 > > Table of Contents > > WINKLEVOSS BITCOIN TRUST > > SCHEDULE OF INVESTMENT > > [ ], 2017 > > Units of > Bitcoin Cost Fair Value > ( > See Note 2(C)) % of Net > Assets > > Investment in Bitcoin > [ ] $ [ ] $ [ ] [ ]% > > Total Investment > $ [ ] $ [ ] [ ]% > > Other assets in excess of liabilities / (Liabilities in excess of > other assets) > $ [ ] [ ]% > > Net Assets > $ [ ] [ ]% > > The accompanying notes are an integral part of these financial > statements. --- 9882c10179,10189 ----------------------- < Redeemable Shares: > F-3 > > Table of Contents > > WINKLEVOSS BITCOIN TRUST > > STATEMENT OF OPERATIONS > > [ ], 2017 > > Expenses: --- 9884,9885c10191 ----------------------- < Redeemable capital Shares, no par value, unlimited amount authorized, < [ ] outstanding (at redemption value) > Net expenses --- 9888c10194,10195 ----------------------- < Shareholder's Equity: > Net investment loss > $ [ ] --- 9890,9891c10197,10198 ----------------------- < Retained earnings < - > Realized and Change in Unrealized Gain / (Loss) on Investment in > Bitcoin: --- 9893c10200,10201 ----------------------- < Total Liabilities and Shareholder's Equity > Net realized gain / (loss) from investment in bitcoin sold to pay > expenses --- 9896,9897c10204,10206 ----------------------- < The accompanying notes are an integral part of this financial < statement. > Net realized gain / (loss) from bitcoin distributed for the redemption > of shares > $ [ ] --- 9899c10208,10339 ----------------------- < F-2 > Net change in unrealized appreciation / (depreciation) on investment > in bitcoin > $ [ ] > > Net realized and change in unrealized gain / (loss) on investment > in bitcoin > $ [ ] > > Net Income / (Loss): > $ [ ] > > Net income / (loss) per Share > $ [ ] > > Weighted average number of Shares > [ ] > > The accompanying notes are an integral part of these financial > statements. > > F-4 > > Table of Contents > > WINKLEVOSS BITCOIN TRUST > > STATEMENT OF CHANGES IN NET ASSETS > > [ ], 2017 > > Net Assets-Opening Balance, fair value ( > See Note 2(C)): > $ [ ] > > Creations > [ ] > > Redemptions > [ ] > > Net investment loss > $ [ ] > > Net realized gain / (loss) from investment in bitcoin sold to pay > expenses > $ [ ] > > Net realized gain / (loss) from bitcoin distributed for the redemption > of shares > $ [ ] > > Net change in unrealized appreciation / (depreciation) on investment > in bitcoin > $ [ ] > > Net Assets-Closing Balance, fair value ( > See Note 2(C)): > $ [ ] > > The accompanying notes are an integral part of these financial > statements. > > F-5 > > Table of Contents > > WINKLEVOSS BITCOIN TRUST > > STATEMENT OF CASH FLOWS > > [ ], 2017 > > Increase / (Decrease) in Cash from Operations > > Proceeds received from sales of bitcoin > $ [ ] > > Expenses paid > $ [ ] > > Increase / (Decrease) in cash resulting from operations > $ [ ] > > Cash and cash equivalents at beginning of period > $ [ ] > > Cash and cash equivalents at end of period > $ [ ] > > Supplemental Disclosure of Non-Cash Financing Activities > > Value of bitcoin received for creation of Shares > $ [ ] > > Value of bitcoin distributed for redemption of Shares > $ [ ] > > Reconciliation of Net Income / (Loss) to Net Cash Provided by Operating > Activities > > Net income / (loss) > $ [ ] > > Adjustments to reconcile net income / (loss) to net cash provided by > operating activities > $ [ ] > > Proceeds from sales of bitcoin to pay expenses > $ [ ] > > Net realized gain / (loss) from investment in bitcoin sold to pay > expenses > $ [ ] > > Net realized gain / (loss) from bitcoin distributed for the redemption > of shares > $ [ ] > > Net change in unrealized appreciation / (depreciation) on investment > in bitcoin > $ [ ] > > Increase / (Decrease) in liabilities > $ [ ] > > Net cash provided / (used) by operating activities > $ [ ] > > The accompanying notes are an integral part of these financial > statements. > > F-6 --- 9907c10347 ----------------------- < [ ], 2016 > [ ], 2017 --- 9912,9913c10352,10356 ----------------------- < trust formed on December 30, 2014, pursuant to a trust agreement (the < "Trust Agreement"). > trust formed on December 30, 2014 and operates pursuant to the Amended > and Restated Declaration of Trust and Trust Agreement (the "Trust > Agreement") between Digital Asset Services, LLC, formerly Math-Based > Asset Services, LLC (the "Sponsor"), and Delaware Trust Company (the > "Trustee"). --- 9919c10362 ----------------------- < The Trust is expected to issue or > The Trust is initially expected to issue or --- 9921c10364 ----------------------- < 50,000] Shares (each block of 50,000 Shares is a "Basket"). > 100,000 Shares (each block of 100,000 Shares is a "Basket"). --- 9924c10367 ----------------------- < basis as described in the "Plan of Distribution" section below. > basis. --- 9928,9932c10371,10376 ----------------------- < to the value of the Shares being purchased). < On a redemption, the Trust will distribute bitcoin equal in value to < the value of the Shares being redeemed to the redeeming Authorized < Participant in exchange for the delivery to the Trust of one or < more Baskets. > to the net asset value per Share of the Trust ("NAV") multiplied by > the number of Shares in the Basket). > On a redemption, the Trust will distribute bitcoin equal in value > to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. --- 9934,9937c10378,10382 ----------------------- < Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value < of the Basket will be equal to the value of 50,000 Shares at their < net asset value per Share on that day). > Transfer Agent in a creation or redemption transaction will be the > same (i.e., each Basket will initially consist of 100,000 Shares and > the value of the Basket will be equal to the value of 100,000 Shares > (or such other amount as determined by the Trust from time to time) > at their net asset value per Share on that day). --- 9940,9943c10385,10386 ----------------------- < Digital Asset Services, LLC, formerly Math-Based Asset Services, < LLC, is the sponsor of the Trust (the "Sponsor"), a Delaware limited < liability company whose sole member is Winklevoss Capital Management, < LLC. > The Sponsor is a Delaware limited liability company whose sole member > is Winklevoss Capital Fund, LLC. --- 9945,9948c10388,10391 ----------------------- < performance of Delaware Trust Company (the "Trustee") and the < Trust's principal service providers. < The Trustee is responsible for the day-to-day administration of < the Trust. > performance of the Trustee and the > Trust's principal service providers. State Street Bank and > Trust Company (the "Administrator") performs certain day-to-day > administrative functions for the Trust. --- 9952,9961c10395,10404 ----------------------- < Baskets") on [ ], 2016. At contribution, the value of the bitcoin < deposited with the Trust was based on the Gemini Exchange Spot < Price (as defined in the Registration Statement of the Trust) of $[ < ]/bitcoin. The Initial Purchaser owns one hundred (100) percent of < the outstanding Shares. [The Initial Purchaser is not affiliated with < the Sponsor or the Trustee.] < < The investment objective of the Trust is for the Shares to track < the price of bitcoin as measured at 4:00 p.m. Eastern time using the < Gemini Exchange Spot Price on each Business Day, less the > Baskets") on [ ], 2017. At contribution, the value of the bitcoin > deposited with the Trust was based on > the Gemini Exchange Auction Price (as defined in the Registration > Statement of the Trust) of $[ ]/bitcoin. The Initial Purchaser owns > one hundred (100) percent of the outstanding Shares. The Initial > Purchaser is not affiliated with the Sponsor or the Trustee. > > The investment objective of the Trust is for the Shares to track the > price of bitcoin using > the Gemini Exchange Auction Price on each Business Day, less the --- 9972,9974d10414 ----------------------- < The following is a summary of significant accounting policies followed < by the Trust. < --- 9976,9979c10416,10555 ----------------------- < principles generally accepted in the United States ("GAAP") < requires those responsible for preparing financial statements to < make estimates and assumptions that affect the reported amounts and < disclosures. Actual results could differ from those estimates. > principles generally accepted in the United States requires those > responsible for preparing financial statements to make estimates and > assumptions that affect the reported amounts and disclosures. Actual > results could differ from those estimates. The following is a summary > of significant accounting policies followed by the Trust > > A. Basis of Accounting > > The financial statements have been prepared in conformity with > U.S. generally accepted accounting principles ("U.S. GAAP") as detailed > in the Financial Accounting Standards Board's ("FASB") Codification of > > F-7 > > Table of Contents > > Accounting Standards ("ASC"), which requires management to make > estimates and assumptions that affect the amounts reported in the > financial statements and accompanying notes. > These estimates are based on information available as of the date > of the financial statements; therefore, actual results could differ > materially from those estimates. > > The Trust is considered an investment company under U.S. GAAP for > financial statement purposes and follows the accounting and reporting > guidance applicable to investment companies in FASB ASC Topic 946, > Financial Services-Investment Companies ("Topic 946"), but is not > registered, and is not required to be registered, under the Investment > Company Act of 1940, as amended. > > Additionally, U.S. GAAP contains no authoritative guidance related > to the accounting for bitcoins, digital assets, or virtual currencies. > As a result, transactions involving bitcoin have been accounted for > analogizing to existing accounting standards that management believes > are appropriate to the circumstances. There can be no certainty as to > when the FASB or other standard setter will issue accounting standards > for bitcoin, digital assets, or virtual currencies, if at all. > > B > . Bitcoin Asset Class > > The Sponsor has concluded that the > Trust's bitcoin assets are most analogous to commodities and the > U.S. Commodity Futures Trading Commission ("CFTC") has recently > determined that bitcoin is a commodity as defined in Section 1a(9) > of the Commodity Exchange Act. 7 U.S.C. § 1a(9); see also In re > Coinflip, Inc., No. 15-29 (CFTC Sept. 17, 2015); In re BFXNA Inc., > Case No. 16-19 (CFTC June 2, 2016). > > The important features of bitcoin (and other Digital Assets) are > those that are characteristics of commodities and that distinguish > commodities from other asset classes. Like commodities, bitcoin are > units of commerce that are interchangeable, traded in markets where > customers are not readily identifiable, and are immediately marketable > at quoted prices. Further, like gold bullion and other commodities, > bitcoin come into supply only when they are mined or extracted and > are a limited resource. > > C. Fair Value Measurement > > As an investment company following Topic 946, the Trust accounts for > its investment in bitcoin at the current fair value. In determining > fair value, the Trust follows the guidance of FASB ASC Topic 820, > Fair Value Measurement ("ASC Topic 820"). > > U.S. GAAP defines fair value as the price the Trust would receive to > sell an asset or pay to transfer a liability in an orderly transaction > between market participants at the measurement date. > > ASC Topic 820 establishes a fair value hierarchy: > > Level 1-Quoted prices in active markets that are accessible at the > measurement date for identical, unrestricted assets or liabilities, > without adjustments. > > Level 2-Quoted prices in markets that are not considered to be active > for identical or similar assets or liabilities, quoted prices in > active markets of similar assets or liabilities, and inputs other > than quoted prices that are observable or can be corroborated by > observable market data. > > Level 3-Pricing inputs are unobservable and include situations where > there is little, if any, market activity for the investment. > > F-8 > > Table of Contents > > The investment in bitcoin is classified as a Level 1 asset, as the > Trust's investment in bitcoin is calculated using quoted prices in > active markets for identical assets that the Trust has the ability > to access. The following table summarizes the > Trust's investments at fair value: > > [ ], 2017 > Level 1 Level 2 Level 3 > > Investment in Bitcoin > $ [ ] $ - $ - > > Total > $ [ ] $ - $ - > > The Trust accounts for bitcoin at its initial cost and subsequently > re-measures the carrying amounts at the end of each reporting > period based on the current fair value in accordance with ASC Topic > 946. The changes in fair value of bitcoin are reflected as realized > and unrealized gains (losses) in the statement of operations. In > accordance with FASB ASC rule 820-35-5, the Trust has determined that > the Gemini Exchange is the most advantageous market for the Trust > based on a variety of criteria following ASC Topic 820: > (i) the licensing status of the marketplace or operator in its > operating jurisdiction, including its BSA/AML program; > (ii) the risk to the Trust and its Shareholders of transmitting > bitcoin to (and funds away from) the marketplace; > (iii) the liquidity available on the marketplace, particularly at > the scale required for the Creation and Redemption Baskets; and > (iv) the overall daily volume of the marketplace. > These criteria are evaluated from the perspective of the Trust, > and it is expected that other key market participants, such as the > Trust's Authorized Participants (as enumerated in the most recent > Registration Statement or other filing), would reach a similar > determination. > The Trust intends to periodically reevaluate its determination of > its most advantageous market as the Bitcoin ecosystem and Bitcoin > Exchange Marketplace continue to evolve. > > As an investment company following Topic 946, the Trust accounts for > its investment in bitcoin at the current fair value in accordance > with FASB ASC rule 820-35-10-9A. The fair value of bitcoin is measured > based on > the Gemini Exchange Auction Price (as defined in the most recent > Registration Statement), which results from the two-sided auction > which occurs daily at 4:00 p.m. Eastern Time on the Gemini Exchange, > which has been determined to be the most advantageous market. If, > due to extraordinary circumstances such as the unavailability of > the Gemini Exchange, that price is unavailable, fair value would be > measured based on another publicly available price as > the Sponsor may in good faith deem represents the fair value of the > Trust's bitcoin. --- 9981c10557 ----------------------- < A. Valuation of Bitcoin > D. Custody of Bitcoin --- 9984,10002c10560,10566 ----------------------- < Trust's bitcoin is held on a segregated basis by the Custodian using < the Custodian's Cold Storage System, on behalf of the Trust, in unique < Bitcoin addresses with balances that can be directly verified on the < < F-3 < < Table of Contents < < Bitcoin Blockchain. The < Trust's bitcoin is valued, for financial statement purposes, at the < lower of cost or market. The cost of bitcoin is determined according < to the average cost method and the market value is based on the Gemini < Exchange Spot Price of the bitcoin being valued, or such other publicly < available price as < the Sponsor may in good faith deem represents the fair market value < of the < Trust's bitcoin. Realized gains and losses on sales of bitcoin, or < bitcoin distributed in the redemption of a Basket, is calculated on < a trade date basis using average cost. > Trust's bitcoin is held on a segregated basis by Gemini Trust Company, > LLC (the "Custodian") using the Custodian's Cold Storage System, on > behalf of the Trust, in unique Bitcoin addresses with balances that can > be directly verified on the Bitcoin Blockchain. The cost of bitcoin is > determined according to the average cost method. Realized gains and > losses on sales of bitcoin, or bitcoin distributed in the redemption > of a Basket, is calculated on a trade date basis using average cost. --- 10004c10568 ----------------------- < B. Creation and Redemption of Shares > E. Creation and Redemption of Shares --- 10009,10010c10573 ----------------------- < Authorized Participants on an ongoing basis as described in the < "Plan of Distribution" section below. > Authorized Participants on an ongoing basis. --- 10014,10018c10577,10581 ----------------------- < to the value of the Shares being purchased). < On a redemption, the Trust will distribute bitcoin equal in value to < the value of the Shares being redeemed to the redeeming Authorized < Participant in exchange for the delivery to the Trust of one or < more Baskets. > to the NAV multiplied by the number of Shares in the Basket). > On a redemption, the Trust will distribute bitcoin equal in value > to the NAV multiplied by the number of Shares in the Basket to the > redeeming Authorized Participant in exchange for the delivery to the > Trust of one or more Baskets. --- 10020,10023c10583,10587 ----------------------- < Administrator in a creation or redemption transaction will be the < same (i.e., each Basket will consist of 50,000 Shares and the value < of the Basket will be equal to the value of 50,000 Shares at their < net asset value per Share on that day). > Transfer Agent in a creation or redemption transaction will be the > same (i.e., each Basket will initially consist of 100,000 Shares and > the value of the Basket will be equal to the value of 100,000 Shares > (or such other amount as determined by the Trust from time to time) > at their net asset value per Share on that day). --- 10025a10590,10593 ----------------------- > F-9 > > Table of Contents > --- 10030,10047c10598,10613 ----------------------- < settle securities transactions through the book-entry facilities < of The Depository Trust Company and which have entered into a < contractual arrangement with the Trust Agency Service Provider < and the Sponsor governing, among other matters, the creation and < redemption processes. Holders of the Shares of the Trust may redeem < their Shares at any time acting through an Authorized Participant and < in the prescribed Basket form; provided, however, that redemptions of < Baskets may be suspended during any period in which regular trading < on Bats is suspended or restricted, or in which an emergency exists < as a result of which delivery, disposal or evaluation of bitcoin is < not reasonably practicable. < < The Shares are classified as "Redeemable Capital Shares" for financial < statement purposes, since they are subject to redemption at the < option of Authorized Participants. Outstanding Shares are reflected < at redemption value, which represents the maximum obligation (based < on net asset value per Share), with the difference from historical < cost recorded as an offsetting amount to Retained Earnings. > settle securities transactions through the book-entry facilities of > The Depository Trust Company and which have entered into a contractual > arrangement with the Transfer Agent and the Sponsor governing, among > other matters, the creation and redemption processes. Holders of the > Shares of the Trust may redeem their Shares at any time acting through > an Authorized Participant and in the prescribed Basket form; provided, > however, that redemptions of Baskets may be suspended during any > period in which regular trading on Bats is suspended or restricted, > or in which an emergency exists as a result of which delivery, > disposal or evaluation of bitcoin is not reasonably practicable. > > The Shares are classified as "Net Assets" for financial statement > purposes, since they are subject to redemption at the option > of Authorized Participants. Outstanding Shares are reflected at > redemption value, which represents the maximum obligation (based on > net asset value per Share). --- 10049c10615 ----------------------- < At [ ], 2016, there are no Shares whose redemption value exceeds > At [ ], 2017, there are no Shares whose redemption value exceeds --- 10052c10618 ----------------------- < At [ ], 2016, [ ] Shares are outstanding. > At [ ], 2017, [ ] Shares are outstanding. --- 10057,10062c10623,10631 ----------------------- < is pending, a respective account receivable and/or payable will < be recorded. < < The per Share number of bitcoin distributed for the redemption of < a Basket is calculated daily by the Administrator, using the Gemini < Exchange Spot Price, or such other publicly available price as > is pending, a respective account receivable and/or payable will be > recorded, rather than a contra equity, due to the expected continuing > sales and redemption of Shares and the three-day settlement period > for Shares. > > The per Share number of bitcoin distributed for the redemption of a > Basket is calculated daily by the Administrator, using > the Gemini Exchange Auction Price, or such other publicly available > price as --- 10068c10637 ----------------------- < generally not considered a taxable event for Shareholders but [is > generally not considered a taxable event for Shareholders but is --- 10070,10076c10639,10662 ----------------------- < a gain or loss recognized currently]. For the purposes of creations < and redemptions of Baskets, net asset value per Share is computed < by deducting all accrued fees, expenses and other liabilities of < the Trust, including the Sponsor's Fee, from the fair value of the < bitcoin held by the Trust. < < F-4 > a gain or loss recognized currently. For the purposes of creations > and redemptions of Baskets, NAV is computed by deducting all accrued > fees, expenses and other liabilities of the Trust, including the > Sponsor's Fee discussed below, from the fair value of the bitcoin > held by the Trust. > > F. Calculation of Net Asset Value > > On each Business Day, the Administrator will calculate the NAV of > the Trust as measured at 4:00 p.m. Eastern Time (the "Evaluation > Time") using > the Gemini Exchange Auction Price on each Business Day. > The Sponsor will provide > the Gemini Exchange Auction Price, which is publicly available, to > the Administrator each day. The NAV of the Trust is the asset value > of the Trust less its liabilities (which include accrued but unpaid > fees and expenses) divided by the number of outstanding Shares as of > 4:00 p.m. Eastern Time each Business Day. > > G. Expenses and Realized Gains / (Losses) > > The primary expense of the Trust is the remuneration due to the > Sponsor (the "Sponsor's Fee"), which is paid by the Trust through > in-kind transfers of bitcoin to the Sponsor. --- 10078c10664,10668 ----------------------- < Table of Contents > The Sponsor's Fee shall be calculated by the Administrator and paid > by transfer of bitcoin from the segregated bitcoin account of the > Trust to the account maintained by the Custodian for the Sponsor. > The Sponsor's Fee will accrue daily at an annualized rate equal to > [ ] percent of the bitcoin held by the Trust, paid monthly in arrears. --- 10080c10670,10673 ----------------------- < C. Investment in Bitcoin > The Sponsor has agreed to assume the following administrative and > marketing expenses incurred by the Trust: > (i) the Trustee's monthly fee and reimbursable expenses (including > indemnification amounts) under the --- 10082,10083c10675 ----------------------- < At [ ], 2016, the Trust owned [ ] bitcoin, with a carrying value < (lower of cost or market basis) of $[ ]. > F-10 --- 10085c10677 ----------------------- < D. Expenses > Table of Contents --- 10087,10089c10679,10725 ----------------------- < The Trust will pay to the Sponsor a fee that will accrue daily at an < annualized rate equal to 0. [ ] percent of the bitcoin held by the < Trust, paid monthly in arrears (the "Sponsor's Fee"). > Trust Agreement; > (ii) the Administrator's monthly fees and reimbursable expenses under > the Administration Agreement; > (iii) the Transfer Agent's monthly fees and reimbursable expenses > under the Transfer Agency and Services Agreement; > (iv) the Custodian's monthly fees and reimbursable expenses under > the Trust Custody Agreement; > (v) Exchange listing fees; > (vi) Securities and Exchange Commission ("SEC") registration fees; > (vii) printing and mailing costs; > (viii) costs of maintaining the > Trust's website; > (ix) audit fees; > (x) marketing expenses; and > (xi) up to $100,000 per annum in legal expenses. > > With respect to expenses not otherwise assumed by the Sponsor, > the Sponsor will instruct the Custodian to sell, or otherwise cause > the sale of that quantity of bitcoin as may be necessary to pay these > expenses of the Trust pursuant to the following procedures. > The Sponsor will instruct the Custodian to transfer bitcoin from the > Trust Custody Account to the Trust Expense Account. > > The Sponsor will cause bitcoin to be sold through dealers or by the > Custodian or Sponsor directly on a Bitcoin Exchange (which may include > the Gemini Exchange). > The Sponsor may consider the market price (relative to the value of > a bitcoin as represented by > the Gemini Exchange Auction Price) expected to be obtained by such > dealer or through such Bitcoin Exchange and the ability of the dealer > or Bitcoin Exchange to conduct the sale of bitcoin with a minimal > impact on the market price of bitcoin. > The Sponsor may offset the importance of one factor against the > remaining factors. > The Custodian may be the purchaser of such bitcoin only if the > transaction is the result of a separate arm's-length transaction and > the sale transaction is made at > the Gemini Exchange Auction Price or such other publicly available > price that the Sponsor in good faith deems fair and reasonable > with respect to the Trust, in each case as set following the sale > order. Neither the Sponsor nor the Administrator is liable for > depreciation or loss incurred by reason of any sale. > > Realized gains or losses result from the transfer of bitcoin for Share > redemptions and / or the payment of expenses and are recognized on > a trade date basis and are determined as the difference between the > fair value and cost of bitcoin transferred. --- 10091c10727 ----------------------- < E. Income Taxes > H. Income Taxes --- 10098,10100c10734,10746 ----------------------- < and the Administrator will report the < Trust's proceeds, income, deductions, gains, and losses to the Internal < Revenue Service on that basis. > and the > Trust's proceeds, income, deductions, gains, and losses will be > reported to the Internal Revenue Service on that basis. > > The Trust has adopted FASB ASC Topic 740-10, Income Taxes. > The Sponsor has evaluated the application of ASC Topic 740-10 to the > Trust, to determine whether or not there are uncertain tax positions in > its major jurisdictions that require financial statement recognition. > Based on this evaluation, the Sponsor has determined no reserves for > uncertain tax positions are required to be recorded as a result of > the application of ASC Topic 740. > As a result, no income tax liability or expense has been recorded in > the accompanying financial statements. --- 10110c10756 ----------------------- < 4. Related Parties-Sponsor and Trustee Fees > 4. Related Parties --- 10112,10135c10758,10759 ----------------------- < Fees are paid to the Sponsor as compensation for services performed < under the Trust Agreement and for assuming the following administrative < and marketing expenses incurred by the Trust: < (i) the Trustee's monthly fee and reimbursable expenses (including < indemnification amounts) under the Trust Agreement, < (ii) the Administrator's monthly fees and reimbursable expenses under < the Trust Servicing Agreement, < (iii) the Trust Agency Service Provider's monthly fees and reimbursable < expenses under the Trust Agency Service Provider Agreement, < (iv) the Custodian's monthly fees and reimbursable expenses under < the Trust Custody Agreement, < (v) Exchange listing fees, < (vi) SEC registration fees, < (vii) printing and mailing costs, < (viii) costs of maintaining the < Trust's website, < (ix) audit fees, < (x) up to $[ ] per annum in marketing expenses and < (xi) up to $[100,000] per annum in legal expenses. < The Sponsor will also pay up to $[ ] per annum in costs relating to < the engagement of the technology security consultant and any repairs < or upgrades to the Cold Storage System. < Any such amounts in excess of $[ ] per annum will be borne by the < Trust as extraordinary expenses. > The Sponsor and the Custodian are considered to be related parties > to the Trust. --- 10137,10142c10761,10766 ----------------------- < The Sponsor's Fee will accrue daily in bitcoin at an annualized rate < equal to [ ] percent of the bitcoin held by the Trust and will be < payable monthly in bitcoin, in arrears. < The Sponsor, from time to time, may temporarily waive all or a < portion of the Sponsor's Fee at its discretion for a stated period of < time. Presently, the Sponsor does not intend to waive any of its fees. > Under the Trust Agreement, all management functions of the Trust > have been delegated to and are conducted by the Sponsor, its agents, > and its affiliates, including without limitation, the Custodian, > and its agents. > > F-11 --- 10144,10148c10768,10777 ----------------------- < Affiliates of the Trustee or < the Sponsor may from time to time act as Authorized Participants < or purchase or sell bitcoin or the Shares for their own account, as < agent for their customers and for accounts over which they exercise < investment discretion. > Table of Contents > > In their capacities as officers of the Sponsor, the principal executive > officer and principal financial officer of > the Sponsor may take certain actions and execute certain agreements and > certifications for the Sponsor in its capacity as Sponsor of the Trust. > Additionally, the Sponsor and/or its affiliates or agents provide > access to the intellectual property related to and monitor the Cold > Storage System used by the Custodian. > The Sponsor and the Custodian are under common management control. --- 10154,10163c10783 ----------------------- < of the Trust. The general role, responsibilities and regulation of < the Custodian are further described in " < The Custodian" and "Custody of the < Trust's Bitcoin." < < The Custodian and its affiliates may from time to time act as < Authorized Participants or purchase or sell bitcoin or the Shares < for their own account or as agent for their customers. < < F-5 > of the Trust. --- 10165c10785,10787 ----------------------- < Table of Contents > The Custodian and its affiliates may from time to time purchase or > sell bitcoin or the Shares for their own account or as agent for > their customers. --- 10215,10219c10837,10842 ----------------------- < Under the Trust Agreement, each of the Trustee (and its directors, < employees and agents) and the Sponsor (and its members, managers, < directors, officers, employees, affiliates) is indemnified against < any liability, cost or expense it incurs without gross negligence, < willful misconduct or bad faith on its part. The > Under the Trust Agreement, the Trustee (and its officers, directors, > employees, affiliates and agents) is indemnified against any liability, > cost or expense it incurs with respect to the performance of the > Trust Agreement, the creation, operation or termination of the Trust > or the transactions contemplated under the Trust Agreement without > gross negligence, willful misconduct or bad faith on its part. The --- 10228c10851 ----------------------- < date, [ ], 2016. > date, [ ], 2017. --- 10230c10853 ----------------------- < F-6 > F-12 --- 10240c10863 ----------------------- < Until [ ], 2016 (twenty-five (25) calendar days after the date of > Until [_], 2017 (twenty-five (25) calendar days after the date of --- 10248c10871 ----------------------- < [ ], 2016 > [ ], 2017 --- 10265,10319c10888,10933 ----------------------- < Section [ ] of the Trust Agreement ("Trust Agreement") between < Delaware Trust Company, the Registrant's Trustee ("Trustee"), and < the Sponsor provides that the Trustee, its directors, employees and < agents (each a "Trustee Indemnified Party") shall be indemnified and < defended by the Trust and the Sponsor, jointly and severally, and held < harmless against any and all losses, claims, damages, liabilities, < joint or several, expenses (including legal fees and expenses), < judgments, fines, penalties, interest, settlements or other amounts < arising from any and all threatened, pending or completed claims, < demands, actions, suits or proceedings, whether civil, criminal, < administrative or investigative, and whether formal or informal and < including appeals, in which any indemnitee may be involved, or is < threatened to be involved, as a party or otherwise, by reason of < its status as an indemnitee whether arising from acts or omissions < to act occurring before or after the date of the Trust Agreement, < including the Trustee's indemnification obligations under these < agreements) or by reason of the Trustee's acceptance of the Trust < Agreement incurred without gross negligence, willful misconduct or < bad faith on the part of such indemnified party in connection with < the performance of its obligations under the Trust Agreement or any < such other agreement or any actions taken in accordance with the < provisions of the Trust Agreement or any such other agreement. Such < indemnity shall include payment from the Trust or the Sponsor of the < costs and expenses incurred by such indemnified party in defending < itself against any claim or liability in its capacity as Trustee. Any < amounts payable to an indemnified party may be payable in advance or < shall be secured by a lien on the Trust. < < Section [ ] of the Trust Agreement provides that the Sponsor and its < members, managers, directors, officers, employees, affiliates (as < such term is defined under the Securities Act of 1933, as amended < (the "Securities Act")) and subsidiaries shall be indemnified by < the Trust and held harmless against any loss, liability or expense < incurred without gross negligence, willful misconduct or bad faith < on the part of such indemnified party arising out of or in connection < with the performance of its obligations under the Trust Agreement and < under each other agreement entered into by the Sponsor in furtherance < of the administration of the Trust (including, without limiting < the scope of the foregoing, any Authorized Participant Agreement) < or any actions taken in accordance with the provisions of the Trust < Agreement. Such indemnity shall include payment from the Trust of the < costs and expenses incurred by such indemnified party in defending < itself against any claim or liability in its capacity as Sponsor. Any < amounts payable to an indemnified party may be payable in advance or < shall be secured by a lien on the Trust. < The Sponsor may, in its discretion, undertake any action that it may < deem necessary or desirable in respect of the Trust Agreement and the < interests of Shareholders and, in such event, the legal expenses and < costs of any such actions shall be expenses and costs of the Trust and < the Sponsor shall be entitled to be reimbursed therefor by the Trust. < < The indemnities provided by Section [ ] of the Trust Agreement shall < survive notwithstanding any termination of the Trust Agreement and < the Trust or the resignation or removal of the Trustee or the Sponsor, < respectively. > Article VIII of the Amended and Restated Declaration of Trust and > Trust Agreement ("Trust Agreement") between Delaware Trust Company, > the Registrant's Trustee ("Trustee"), and the Sponsor provides that > the Trust, as primary obligor, shall indemnify, defend and hold > harmless the Trustee and any of the officers, directors, employees, > affiliates and agents of the Trustee (the "Indemnified Persons") > from and against any and all losses, damages, liabilities, claims, > actions, suits, costs, expenses, disbursements (including reasonable > legal fees and expenses in connection with enforcement of its rights to > indemnity under the Trust Agreement and including the reasonable fees > and expenses of counsel), taxes and penalties of any kind and nature > whatsoever (collectively, "Indemnified Expenses"), to the extent > that such Indemnified Expenses arise out of or are imposed upon or > asserted at any time against such Indemnified Persons with respect > to the performance of the Trust Agreement, the creation, operation > or termination of the Trust or the transactions contemplated under > the Trust Agreement; provided, however, that the Trust shall not > be required to indemnify any Indemnified Person for any Indemnified > Expenses which are a result of the willful misconduct, bad faith or > gross negligence of an Indemnified Person. > If the Trust shall have insufficient assets or improperly refuses > to pay an Indemnified Person within sixty (60) days of a request > for payment owed under the Trust Agreement, the Sponsor shall, as > secondary obligor, compensate or reimburse the Trustee or indemnify, > defend and hold harmless an Indemnified Person as if it were the > primary obligor under the Trust Agreement; provided, however, that the > Sponsor shall not be required to indemnify any Indemnified Person for > any Indemnified Expenses which are a result of the willful misconduct, > bad faith or gross negligence of an Indemnified Person. Any amounts > payable to an indemnified party may be payable in advance or shall > be secured by a lien on the Trust. > In addition, the Sponsor shall > (i) compensate the Trustee in accordance with a separate fee agreement > with the Trustee and > (ii) reimburse the Trustee for all reasonable expenses > (including reasonable fees and expenses of counsel and other > experts). Notwithstanding the foregoing, the Trust may incur certain > extraordinary, > nonrecurring expenses of the Trust that are not borne by the Sponsor, > including the cost of indemnifying the Custodian in the event of > losses resulting from a Digital Asset Network Fork pursuant to the > terms of the Trust Custody Agreement among the Sponsor, the Trust > and the Custodian. > > The indemnities provided by Article VIII of the Trust Agreement shall > survive notwithstanding any termination of the Trust Agreement. --- 10337,10341c10951,10955 ----------------------- < 4.1 Trust Agreement (the "Trust Agreement")* < 4.2 Form of Authorized Participant Agreement* < 4.3 Form of Global Certificate (attached as Exhibit A to the Trust < Agreement) < 5.1 Form of Opinion of Ropes & Gray LLP as to legality* > 4.1 Trust Agreement-filed herewith > 4.1.1 Amended and Restated Trust Agreement-filed herewith > 4.2 Form of Authorized Participant Agreement-filed herewith > 4.3 Form of Global Certificate* > 5.1 Form of Opinion of Richards, Layton & Finger, P.A. as to legality* --- 10343,10345c10957,10959 ----------------------- < 10.1 Trust Custody Agreement* < 10.2 Trust Servicing Agreement* < 10.3 Trust Agency Service Provider Agreement* > 10.1 Trust Custody Agreement-filed herewith > 10.2 Administration Agreement-filed herewith > 10.3 Transfer Agency and Services Agreement-filed herewith --- 10347,10352c10961,10964 ----------------------- < 10.6 Amended and Restated License Agreement* < 23.1 Consent of [AUDITOR]* < 23.2 Consents of Ropes & Gray LLP are included in Exhibits 5.1 and 8.1 < 24.1 Powers of attorney are included on the signature page to the < Trust's registration statement filed with the Securities and Exchange < Commission on July 1, 2013. > 23.1 Consent of BPM LLP* > 23.2 Consent of Richards, Layton & Finger, P.A. is included in > Exhibit 5.1 > 23.3 Consent of Ropes & Gray LLP is included in Exhibit 8.1 --- 10432c11044 ----------------------- < for liability proposes of the issuer and any person that is at that > for liability purposes of the issuer and any person that is at that --- 10517a11130,11131 ----------------------- > (6) > --- 10520,10523c11134,11137 ----------------------- < Pursuant to the requirements of the Securities Act of 1933, the < Registrant has duly caused this amendment to the registration < statement to be signed on its behalf by the undersigned, thereunto < duly authorized, in the City of New York, New York, on June 29, 2016. > Pursuant to the requirements of the Securities Act of 1933, > the Registrant has duly caused this amendment to the registration > statement to be signed on its behalf by the undersigned, thereunto duly > authorized, in the City of New York, New York, on February 8, 2017. --- 10529c11143,11145 ----------------------- < By: /s/ Cameron Winklevoss > By: > > /s/ Cameron Winklevoss --- 10544a11161,11162 ----------------------- > Cameron Winklevoss > --- 10548,10549c11166 ----------------------- < June 29, 2016 < Cameron Winklevoss > February 8, 2017 --- 10558c11175 ----------------------- < June 29, 2016 > February 8, 2017 --- 10564a11182,11200 ----------------------- > > Table of Contents > > EXHIBIT INDEX > > Winklevoss Bitcoin Trust > > Exhibit > Number > > Description > 4.1 Trust Agreement > 4.1.1 Amended and Restated Trust Agreement > 4.2 Form of Authorized Participant Agreement > 10.1 Trust Custody Agreement > 10.2 Administration Agreement > 10.3 Transfer Agency and Services Agreement > > 1