[SecondMarket] Bitcoin Investment Trust™ (Non-Official thread)

[Namworld]

Newly launched Bitcoin Investment Trust™

Now featured on homepage of SecondMarket https://www.secondmarket.com - https://www.secondmarket.com/fund/bitcoin-investment-trust

A trust for accredited investor to invest in Bitcoin without any of the hassles of securing and holding bitcoins. This looks exactly like what the Winklevoss twins hoped to do. Except its done by a SecondMarket subsidiary.

There's only a few posts about it in speculation sub-forum, looks like it missed the securities forum.

http://www.bitcointrust.co/

[canth]

It's only open to experienced investors with over $1m in liquid net worth. It's definitely a good way for a limited number of wealthy investors to invest in bitcoin, but it's not the same as ETF that would be open to all - aka, the Winklevii fund.

[Kluge]

It's only open to experienced investors with over $1m in liquid net worth. It's definitely a good way for a limited number of wealthy investors to invest in bitcoin, but it's not the same as ETF that would be open to all - aka, the Winklevii fund.

"Accredited investor" is usually a self-certification. 

[Ukyo]

"Accredited investor" is usually a self-certification. 

http://www.sec.gov/answers/accred.htm

[zoinky]

Keeping an eye on their daily NAV update.

[canth]

It's only open to experienced investors with over $1m in liquid net worth. It's definitely a good way for a limited number of wealthy investors to invest in bitcoin, but it's not the same as ETF that would be open to all - aka, the Winklevii fund.

"Accredited investor" is usually a self-certification.  

This is true, but Second Market is a fairly conservative company. I can't see them just taking any off-the-street investor without some proof of net worth, investing experience, etc.

[Kluge]

"Accredited investor" is usually a self-certification. 

http://www.sec.gov/answers/accred.htm

Uh huh.

You must be over 18 to view the material on this site. Are you over 18?

Residents of the US are not permitted to access our gambling services. Are you a resident of the US?

Only accredited investors, as defined by the SEC, are permitted to invest in the Bitcoin Investment Trust. Are you an accredited investor?

[canuck]

"Accredited investor" is usually a self-certification. 

http://www.sec.gov/answers/accred.htm

Uh huh.

You must be over 18 to view the material on this site. Are you over 18?

Residents of the US are not permitted to access our gambling services. Are you a resident of the US?

Only accredited investors, as defined by the SEC, are permitted to invest in the Bitcoin Investment Trust. Are you an accredited investor?

Erm...it's slightly more tricky than that.  A good amount of documentation is required to prove that you are an accredited investor.  Second market requires the same sort of accreditation proof that retail stock brokerages require if you claim to be an accredited investor.

This is not simply a tick box that any 12 year old can deftly ignore.

[Kluge]

"Accredited investor" is usually a self-certification. 

http://www.sec.gov/answers/accred.htm

Uh huh.

You must be over 18 to view the material on this site. Are you over 18?

Residents of the US are not permitted to access our gambling services. Are you a resident of the US?

Only accredited investors, as defined by the SEC, are permitted to invest in the Bitcoin Investment Trust. Are you an accredited investor?

Erm...it's slightly more tricky than that.  A good amount of documentation is required to prove that you are an accredited investor.  Second market requires the same sort of accreditation proof that retail stock brokerages require if you claim to be an accredited investor.

This is not simply a tick box that any 12 year old can deftly ignore.

This isn't suggested by the signup form. You self-certify all the information you enter into boxes. There are no mechanics to allow the uploading of any documentation in the accredited investor portion of the signup sheet, though maybe they do this later for every individual (I didn't get past the page asking for information for a background check - I wouldn't know). They indicate they do a background check, but don't indicate what they're looking for.

[statdude]

"Accredited investor" is usually a self-certification. 

http://www.sec.gov/answers/accred.htm

Uh huh.

You must be over 18 to view the material on this site. Are you over 18?

Residents of the US are not permitted to access our gambling services. Are you a resident of the US?

Only accredited investors, as defined by the SEC, are permitted to invest in the Bitcoin Investment Trust. Are you an accredited investor?

Erm...it's slightly more tricky than that.  A good amount of documentation is required to prove that you are an accredited investor.  Second market requires the same sort of accreditation proof that retail stock brokerages require if you claim to be an accredited investor.

This is not simply a tick box that any 12 year old can deftly ignore.

This isn't suggested by the signup form. You self-certify all the information you enter into boxes. There are no mechanics to allow the uploading of any documentation in the accredited investor portion of the signup sheet, though maybe they do this later for every individual (I didn't get past the page asking for information for a background check - I wouldn't know). They indicate they do a background check, but don't indicate what they're looking for.

I can confirm you're right - it's a self-certification, persay.

[canuck]

"Accredited investor" is usually a self-certification. 

http://www.sec.gov/answers/accred.htm

Uh huh.

You must be over 18 to view the material on this site. Are you over 18?

Residents of the US are not permitted to access our gambling services. Are you a resident of the US?

Only accredited investors, as defined by the SEC, are permitted to invest in the Bitcoin Investment Trust. Are you an accredited investor?

Erm...it's slightly more tricky than that.  A good amount of documentation is required to prove that you are an accredited investor.  Second market requires the same sort of accreditation proof that retail stock brokerages require if you claim to be an accredited investor.

This is not simply a tick box that any 12 year old can deftly ignore.

This isn't suggested by the signup form. You self-certify all the information you enter into boxes. There are no mechanics to allow the uploading of any documentation in the accredited investor portion of the signup sheet, though maybe they do this later for every individual (I didn't get past the page asking for information for a background check - I wouldn't know). They indicate they do a background check, but don't indicate what they're looking for.

I can confirm you're right - it's a self-certification, persay.

I find that incredibly difficult to believe.  Second Market operates in the United States as a brokerage that accepts accredited investors.  I've witnessed that rigamarole before and if you provide fake documentation to assert your status as an accredited investor, that's potential jail time.

I'd like to hear from someone who has had to go through the process.  If such a person went through the signup process without receiving even a phone call to go over their documentation, Second Market could be in a lot of trouble.

But then, it was the SEC that had all of their employees busted for sitting about watching porno during business hours so...

[canuck]

Hm...I may be mish mashing Canadian and American rules together.  Seems you yanks don't have it as tough down there although recent changes to rules on general solicitation may be making it tougher.  It would seem that as of now, accredited investors could slip by despite not actually being accredited but that if this happens, securities issuers could run afoul of SEC rule 506(c).

I'll have to do some more reading.  I was firmly under the impression that claiming status as an accredited investor when you are not such a thing was fraudulent.

[jedunnigan]

Trying to forge your way into this fund seems like a silly thing to do. You are putting yourself and the fund at jeopardy. If you have the skills to forge the documents you have the skills to invest 25K in Bitcoin without having to have SecondMarket hold your hand.

This is a stupid conversation to be having on a public forum, anyway. Please think people.

[Kluge]

Hm...I may be mish mashing Canadian and American rules together.  Seems you yanks don't have it as tough down there although recent changes to rules on general solicitation may be making it tougher.  It would seem that as of now, accredited investors could slip by despite not actually being accredited but that if this happens, securities issuers could run afoul of SEC rule 506(c).

I'll have to do some more reading.  I was firmly under the impression that claiming status as an accredited investor when you are not such a thing was fraudulent.

It is fraudulent to claim you are an accredited investor when you aren't, but companies don't have incentive to actively breech users' privacy to attempt denying service, and government doesn't have much incentive to try enforcing these rules on an individual level when there's no indication of illegal activity. The only exception is when there's potential for "terrorism," which is probably the reason for SM's background check. (it's probably not a full financial audit determining whether or not the potential member is an accredited investor - but since they don't say exactly what the check is or what it's for, it's hard to say for sure)

A bigger, similar-in-principle loophole example in these kinds of rules would be the FEC's political contribution rules. You can donate up to $50 anonymously. So long as it isn't a bunch of $50 bills together in the same envelope, the political campaign or organization has no reason to dig into a bunch of $50-containing envelopes (or BTC transactions) unless there's something very suspicious about it. Unless someone's indicating they're running afoul of the law, people are generally allowed to take others' word in good faith.

The Gox-Coinlab suit has a similar issue. CL allegedly told Gox they were properly licensed (or would become licensed -- Gox's statement seems to claim both, but maybe I misread). Gox took this in good faith, which they are allowed to do. Gox isn't and wasn't required by US law to verify everything CL says was absolutely true. Gox didn't have to demand CL's MSB licenses for all 50 states. When Gox decided to back out of the deal, one of the key reasons they gave was that they looked into it and found CL was not fully licensed, so the deal would've been unlawful and is thus void. It's hard to believe Gox did not already know CL wasn't fully licensed, but they signed the contract anyway, probably thinking this excuse to back out was an asset, which it may turn out to be.

The US is increasingly creeping toward a society where every allegation has to be fact-checked by the Surveillance State, with the AML/KYC/BSA laws being thrust into the average joes' awareness thanks to registered BTC exchanges - but we're not completely there, yet. (ETA: I tried to indirectly hint that SM shouldn't be liable for taking lies in good faith when there's no indication it's a lie, but just so it's explicit... - and since I went this far with it - IANAL disclosure, I'm just looking for free legal consultation challenging me if I'm spouting off a ton of misinfo)

Trying to forge your way into this fund seems like a silly thing to do. You are putting yourself and the fund at jeopardy. If you have the skills to forge the documents you have the skills to invest 25K in Bitcoin without having to have SecondMarket hold your hand.

This is a stupid conversation to be having on a public forum, anyway. Please think people.

There are no documents to forge. There are boxes to enter in your income, investments, and net worth, similar to how "liar loans" worked.

[jedunnigan]

It is fraudulent to claim you are an accredited investor when you aren't, but companies don't have incentive to actively breech users' privacy to attempt denying service, and government doesn't have much incentive to try enforcing these rules on an individual level when there's no indication of illegal activity. The only exception is when there's potential for "terrorism," which is probably the reason for SM's background check. (it's probably not a full financial audit determining whether or not the potential member is an accredited investor - but since they don't say exactly what the check is or what it's for, it's hard to say for sure)

Where are you getting this crap? Of course it is in their benefit to check out the details of their investors. Whether or not they do, well that is their problem. If someone reports them to the SEC and they do any kind of an investigation, SecondMarket is fucked.

There are no documents to forge. There are boxes to enter in your income, investments, and net worth, similar to how "liar loans" worked.

Sorry, but lying on the form == forging. You aren't gonna convince anyone in here that is a good idea.

[jungle_dave]

Sounds elitist,
Good luck with that in the BTC community

 

[Pale Phoenix]

If someone reports them to the SEC and they do any kind of an investigation, SecondMarket is fucked.

There are no documents to forge. There are boxes to enter in your income, investments, and net worth, similar to how "liar loans" worked.

Sorry, but lying on the form == forging. You aren't gonna convince anyone in here that is a good idea.

I've registered as an accredited investor with several brokerage companies in the U.S., and never has any supporting documentation been required, such as tax returns, etc.

It is a self certification process whether or not you think it should be.

[jedunnigan]

Guys, I'm just telling you like it is. Not about elitism, etc... Of course you CAN lie on the form, but should you? That depends on whether the benefits are worth the potential civil penalties to you. If you lie and get caught, there are consequences for you and potentially SecondMarket. Why risk it? All they would be doing is buying coins for you. If you are on this forum surely you can buy them yourself.

You can read the securities act of 1933 and similar, the rules are there. You just have to ask yourself whether or not you want to follow them.Don't make this about me.

[canuck]

So basically what this boils down to is SEC rule 506(c) which prohibits general solicitation to retail investors.  This rule was recently changed as before, institutional and accredited investors could not be generally solicited to when it came to startups putting out an IPO.

So where it gets sticky is if a market (like Second Market) fails to properly vet accredited investors, then startups and new funds (like Bitcoin Investment Trust) may unwittingly run afoul of rule 506(c) which still prohibits general solicitation to retail investors.

Short version:  If a retail investor claims to be an accredited investor and is approved as such, funds and startups may be in violation of SEC Rule 506(c) if they solicit the improperly vetted investor for investment in their venture.  Who would take blame for this, I'm not sure.

[Vycid]

This is a pretty big deal. You don't have to be a $1M net worth individual if you self-incorporate.

The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

1. a bank, insurance company, registered investment company, business development company, or small business investment company;

The use of proper traditional exchanges sets the stage for short selling and derivatives, which will be a big part of Bitcoin's coming-of-age.

(Although SecondMarket isn't exactly a "proper traditional exchange", it's a hell of a lot closer than we're used to)