United States securities and exchange commission logo
August 5, 2021
Gregory D. King
Chief Executive Officer
Osprey Bitcoin Trust
520 White Plains Road, Suite 500
Tarrytown, NY 10591
Re: Osprey Bitcoin
Trust
Registration
Statement on Form 10-12G
Filed July 8, 2021
File No. 000-56307
Dear Mr. King:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response and any amendment you may file in
response to these
comments, we may have additional comments.
Form 10-12G filed July 8, 2021
Key Operating Metrics, page 2
1. Based on disclosure on
the facing page, page 2 and in the notes to the financial statements,
it appears that the
principal market to measure fair value of your Bitcoin was Coin Metrics
CMBI Bitcoin Index for
all periods through March 31, 2021. However, it appears that on
May 10, 2021, you
changed the principal market to Coinbase Pro. If true, please revise
your filing to more
clearly disclose that you changed the principal market, the reasons you
changed the principal
market and ensure your disclosure is clear throughout the filing,
including on page 38,
regarding the principal market used to measure fair value at each
period end.
Additionally, please disclose the impact to the fair value measurement of your
Bitcoin on the date of
change.
Gregory D. King
FirstName LastNameGregory D. King
Osprey Bitcoin Trust
Comapany
August NameOsprey Bitcoin Trust
5, 2021
August
Page 2 5, 2021 Page 2
FirstName LastName
Summary, page 3
2. We note the disclosure that the purpose of the Trust is to provide
investors a cost-effective
and convenient way to invest in Bitcoin. Please revise to clarify that
an indirect
investment in Bitcoin through your Units may operate and perform
differently from a
direct investment in Bitcoin and to summarize the material
differences.
3. We note the statement that there can be no guarantee that you will be
successful in listing
the Units on a national securities exchange and that any such listing
will require the
national securities exchange to first receive approval from the SEC.
Revise to
additionally state that to date no national securities exchange has
received such approval
for any Bitcoin trust. In addition, correct the erroneous cross
reference to There is no
guarantee that an active trading market for the Units will continue to
develop.
4. Please disclose in the summary that the Trust is passive and not
actively managed, as you
state on page 42.
5. We note the statement on pages 4 and 5 that "The Trust currently
expects that the value of
any such Additional Currency would be determined by reference to the
principal market."
Please disclose what discretion the Trust has in this regard.
6. Please define Actual Exchange Rate on page 5.
7. We note the disclosure here that the Trust s investment objective is
for the Units (based on
Bitcoin per Unit) to reflect the value of the Bitcoins held by the
Trust, determined by
reference to the Index, less the Trust s expenses and other
liabilities. Please explain how
the Trust evaluates its ability to meet the investment objective in
light of the fact that there
is currently no secondary trading market or redemption program for the
Shares.
Valuation of Bitcoin and Bitcoin Holdings, page 3
8. We note you disclose that the Bitcoin Market Price is calculated using
a non-GAAP
methodology. We also note your disclosure on page 2 that appears to
indicate that the
Bitcoin Market Price is used to measure fair value under US GAAP.
Please revise to
more clearly explain the differences between the fair value
measurements used for US
GAAP amounts and for non-GAAP financial measures. To the extent you
have non-
GAAP financial measures, please revise to disclose the information
required by Item 10(e)
of Regulation S-K. Additionally, please revise to ensure your
disclosure throughout the
filing clearly distinguishes if a fair value metric is GAAP or
non-GAAP measure.
Additional Currency, page 4
9. If material, please revise to disclose the fair value of any
additional currency held by the
trust at each period end and provide appropriate detail including how
it was valued.
Gregory D. King
FirstName LastNameGregory D. King
Osprey Bitcoin Trust
Comapany
August NameOsprey Bitcoin Trust
5, 2021
August
Page 3 5, 2021 Page 3
FirstName LastName
Risk Factors, page 7
10. Provide separately-captioned risk factors addressing the following:
The lack of insurance protection for the Bitcoin that you hold and
Because the Units reflect the estimated accrued but unpaid
expenses of the Trust, the
number of Bitcoins represented by a Unit will gradually decrease
over time as the
Trust s Bitcoins are used to pay the Trust s expenses.
The value of the Units relates directly to the value of Bitcoins, the value of
which may be highly
volatile and subject to fluctuations..., page 15
11. Please revise this risk factor to provide quantitative information
regarding the volatility of
the price of Bitcoin generally and in recent periods, including the
decline in digital asset
prices that began in May 2021.
Due to the unregulated nature and lack of transparency surrounding the
operations of Bitcoin
exchanges..., page 17
12. You state that Bitcoin exchanges are relatively new and, in some
cases, unregulated.
Please revise to discuss in greater detail the extent to which the
material aspects of the
business and operations of Bitcoin exchanges are not regulated. For
example, please
address the fact that trading platforms for digital assets do not
appear to be subject to
regulation in a similar manner as other regulated trading platforms,
such as national
securities exchanges or designated contract markets.
Difficulties or limitations in the processes of issuance and redemption (if
any) of Units may
interfere with opportunities for arbitrage, page 19
13. Provide here a quantitative discussion of the historical premiums of
the closing price of
the Units quoted on OTCQX (and OTC Markets) over the value of the
Trust s NAV per
Unit.
Disruptions at Bitcoin exchanges and potential consequences of a Bitcoin
exchange's failure...,
page 20
14. Please revise this risk factor to reference your use of the Coinbase
Pro Market Price and
discuss any material risks related thereto.
The security of our Bitcoin Holdings cannot be assured, page 21
15. Revise here and in the Description of the Custodial Services Agreement
section beginning
on page 68 to address the following:
Explain what is meant by the statement that the Trust must use the
Custodian s
service on an as is basis;
Explain more fully what is meant by the statement that the
Custodian is not liable for
any loss that is caused, directly or indirectly, by any action
taken to secure the digital
Gregory D. King
FirstName LastNameGregory D. King
Osprey Bitcoin Trust
Comapany
August NameOsprey Bitcoin Trust
5, 2021
August
Page 4 5, 2021 Page 4
FirstName LastName
assets or accounts of the Trust; and
Discuss the "other exceptions" under the Custodial Services
Agreement.
Regulation of the Bitcoin industry continues to evolve, page 24
16. We note that this risk factor includes disclosure regarding a number
of different regulatory
uncertainties, each of which poses its own distinct set of risks to
the business and
operations of the Trust. Please revise to address each of the material
regulatory risks
in separately captioned risk factors, in each case clearly identifying
the risk or uncertainty
and the impact on the Trust.
Bitcoin Exchange Public Market Data, page 37
17. Please revise to provide more detailed disclosure regarding each of
the Bitcoin exchanges
referenced in the table on page 37. In this regard, we note your
disclosure that the
domicile, regulation and legal compliance of the Bitcoin exchanges
included in the Index
varies.
18. Please revise to describe the methodology utilized by the Index
Provider to select a
Bitcoin exchange for inclusion in the Index.
19. Please disclose the extent to which any Bitcoin exchanges have
previously been removed
from the Index by the Index Provider and the reasons thereof.
20. Please disclose the date that the Index was launched. In addition, to
the extent material to
understanding the performance of the Index, please include a chart
comparing the
historical Index to the prices on the each of the Bitcoin exchanges
included in the Index.
Also include a risk factor disclosing any material risks relating to
the limited history of the
Index.
21. Update the disclosure in this section, including the exchanges that
comprise the index, as
of the most recent practicable date.
Bitcoin Market Price, page 38
22. You disclose that in order to calculate the Bitcoin Market Price, the
Sponsor will employ
a cascading set of rules sequentially and in the order as presented,
should one or more
specific rule(s) fail. You also disclose that if the Sponsor makes a
good faith
determination that each sequential rule does not reflect an accurate
Bitcoin price, it will
employ the next rule to determine the Bitcoin Market Price. Please
revise to disclose
any criteria that the Sponsor would use in making such determination.
To the extent such
determination will not be based on predefined criteria, state so here,
and add a risk factor
addressing attendant risks to investors.
23. Please revise to clarify how you will determine whether a third
party's public data feed is
"reasonably reliable" and clarify what you mean by the phrase "major
Bitcoin
exchanges," as you reference in the second and third sequential rules
on page 38.
Gregory D. King
FirstName LastNameGregory D. King
Osprey Bitcoin Trust
Comapany
August NameOsprey Bitcoin Trust
5, 2021
August
Page 5 5, 2021 Page 5
FirstName LastName
24. Please provide illustrative examples regarding how the Sponsor would
use its best
judgment to determine a good faith estimate of the Bitcoin Market
Price under the last
sequential rule, as disclosed on page 39.
25. You state on page 52 that the Sponsor uses the Index to calculate the
Bitcoin Market
Price, however there is no discussion of that in this section. Please
reconcile these
disclosures and expand your disclosure here as necessary.
26. Here, or in another appropriate place, describe the methodology the
Index Provider uses to
determine the Index.
Government Oversight - Regulation of Bitcoin, page 40
27. Please revise this section to discuss specific regulatory changes or
actions in foreign
jurisdictions that may have impacted the price of Bitcoin or may
impact it in the future. In
addition, add a separately captioned risk factor discussing these
matters.
Historical Bitcoin Holdings and Bitcoin Prices, page 46
28. Please update the disclosure in this section to reflect the most
recent practicable date.
Description of the Trust, page 50
29. Please disclose here when, where, and how frequently you will publish
NAV per Unit.
Hypothetical Expense Example, page 50
30. We note your statement that the table on page 49 "does not show the
effect of any waivers
of the Management Fee that may be in effect from time to time" Please
describe the
circumstances under which the Management Fee may be waived from time
to time.
The Index Provider Agreement, page 52
31. Please revise to explain in what way the Index Provider has agreed to
indemnify the
sponsor.
32. Here, or in an appropriate place, disclose how you will notify
Unitholders of material
changes to the Index calculation methodology or composition.
The Sponsor's Role, page 52
33. Please disclose the extent to which the Sponsor has discretion to
select a different index.
The Transfer Agent's Role, page 54
34. You disclose that the "Sponsor directs the Transfer Agent to credit
the number of Creation
Baskets to the investor on behalf of which an Authorized Participant
submitted a creation
order," and that the "Transfer Agent will issue Creation Baskets."
Please revise to define
the terms "Authorized Participant" and "Creation Baskets." We note
similar references on
Gregory D. King
FirstName LastNameGregory D. King
Osprey Bitcoin Trust
Comapany
August NameOsprey Bitcoin Trust
5, 2021
August
Page 6 5, 2021 Page 6
FirstName LastName
pages 58, 59, and 63. To the extent you intend to issue Units through
Authorized
Participants, please revise to provide detailed disclosure regarding
the same.
Conflicts of Interest, page 55
35. Please quantify any significant ownership of Bitcoin by the Sponsor,
any affiliates
thereof, or the Initial Purchaser.
36. We note your disclosure that the "Initial Purchaser, through the
proprietary Bitcoin trading
firm he operates may engage in Bitcoin trading with the Trust
entities." Please also
disclose whether the Sponsor or its affiliates, on its or their own
account, may engage in
Bitcoin purchase or sale transactions with you. If so, please revise
to disclose the
attendant risks related to the foregoing.
The Custodian, page 55
37. We note that Fidelity Digital Asset Services, LLC will serve as the
Trust's Bitcoin
custodian. Please briefly discuss the experience and qualifications of
Fidelity Digital
Asset Services, LLC with respect to acting as a Bitcoin custodian.
Additionally, please
advise if, to your knowledge, Fidelity Digital Asset Services, LLC has
ever been the target
of a material cyber-attack or other act which resulted in a breach of
a digital asset
custodial account and any digital asset loss.
Principal Unitholders, page 56
38. Please disclose the natural person(s) who directly or indirectly
exercise sole or shared
voting or investment control over the Units held by Celsius Network
Ltd. Refer to Item
403 of Regulation S-K and Exchange Act Rule 13d-3.
The Initial Purchaser, page 56
39. You disclose that the "biggest investor" in the Trust was the Initial
Purchaser as of
December 31, 2020. Please revise to identify the Initial Purchaser and
briefly discuss the
nature of such investments. Also revise to identify the "Individual
Purchaser," as
referenced in the second paragraph of this section.
Description of the Units, page 57
40. We note that section 7.1 of the Second Amended and Restated
Declaration of Trust and
Trust Agreement filed as Exhibit 4.1 includes a provision that limits
the rights of
Unitholders to bring a derivative action. Please revise to address the
following:
Include risk factor disclosure highlighting the material risks
related to this provision,
including how it will impact your investors and the difficulties
that Unitholders may
have in attempting to locate other Unitholders to reach the 10%
threshold for
derivative actions;
Revise the risk factor "As a Unitholder, you will not have the
rights normally
associated with ownership of Units of other types of investment
vehicles" on page 22
Gregory D. King
FirstName LastNameGregory D. King
Osprey Bitcoin Trust
Comapany
August NameOsprey Bitcoin Trust
5, 2021
August
Page 7 5, 2021 Page 7
FirstName LastName
to appropriately reflect this provision;
Disclose any questions as to enforceability under federal and
state law;
Clarify whether this provision applies to claims under the
federal securities laws; and
If the provision does not apply to actions arising under the
federal securities laws,
ensure that the provision states this clearly, or tell us how you
will inform investors in
future filings that the provision does not apply to any actions
arising under the federal
securities laws.
Transfer Restrictions, page 59
41. Please disclose whether the Unitholder must make a request to have the
legend removed.
If not, please explain the reasons for removing the legends in the
absence of request. Also
please revise to disclose any representations that will be required to
be made to counsel as
part of the legend removal process, and clarify whether the
Unitholders will be required to
make such representations or whether they will come solely from the
Sponsor.
42. Please provide us your analysis as to whether the minimum one-year
holding period will
be shortened for Units purchased from the Trust once the Trust has
been subject to
Securities Exchange Act reporting for at least ninety days, and revise
your disclosure as
appropriate.
Description of Issuance of Units, page 60
43. Revise to describe how you will determine how many Units you will
issue for each
purchase order. Disclose how you will determine how many Bitcoin are
represented by
each purchase order. In addition, the fact sheet on your website
refers to an additional
investment minimum of $10,000, but this is not discussed in the
registration statement.
Please advise.
Key Storage, page 60
44. Please disclose what portion of the digital assets are currently held
in cold storage.
Explain whether there are any minimum or maximum amounts that must be
in either hot
or cold storage. To the extent the determination regarding how to
store digital assets is
solely within the discretion of the Custodian, revise your disclosure
accordingly. To the
extent applicable, include appropriate risk factor disclosure
addressing the risk that the
Custodian may utilize hot storage for material amounts of the Trusts'
assets, thereby
increasing the risk of misappropriation.
Purchase Procedures, page 61
45. Disclose in greater detail how the Sponsor will choose a counterparty
when purchasing
Bitcoin:
Describe the criteria the Sponsor uses to select the group of
counterparties through
which it rotates;
Explain what discretion it has in selecting the group of
counterparties through which
Gregory D. King
FirstName LastNameGregory D. King
Osprey Bitcoin Trust
Comapany
August NameOsprey Bitcoin Trust
5, 2021
August
Page 8 5, 2021 Page 8
FirstName LastName
it rotates;
Discuss in greater detail the factors the Sponsor will use to
rotate through the
counterparties; and
Explain what discretion the Sponsor has when choosing a
counterparty for a specific
transaction.
In addition, list all counterparties through which you currently
rotate.
Termination of the Trust, page 67
46. We note your disclosure on page 78 that the "death, legal disability,
bankruptcy,
insolvency, dissolution, or withdrawal of any Unitholder (as long as
such Unitholder is not
the sole Unitholder of the Trust) shall not result in the termination
of the Trust, and such
Unitholder, his/her estate, custodian or personal representative shall
have no right to
withdraw or value such Unitholder s Units." Please revise to add
risk factor disclosure
related to such provision and any material risks related thereto.
Description of the Custodial Services Agreement, page 68
47. Please discuss the extent to which you have inspection or auditing
rights under the
Custodial Services Agreement, and if applicable, the extent and manner
in which the
Trust or other parties will inspect or audit the Custodian. Explain in
greater detail how
you intend to validate existence, exclusive ownership and software
functionality of private
keys and other ownership records.
Statements of Assets and Liabilities, page F-3
48. It appears that the line items presented in net assets in your annual
and interim statements
of assets and liabilities represent the change in net assets for a
period as opposed to the
accumulated amount of each item as of the end of the period. Please
tell us why you
believe this presentation is appropriate or revise. For example,
paid-in capital should
represent the accumulated investment in the trust as of each period
end presented.
Similarly, you should present the accumulated amount of the unrealized
appreciation on
investment in Bitcoin as of the period end as opposed to the net
change for the period.
Note 3. Fair Value of Bitcoin, page F-11
49. Please tell us how you determined if the fair value measurement for
your investment in
Bitcoin should be classified as Level 1 of fair value hierarchy.
Exhibits
50. Please file the following documents as exhibits to the registration
statement:
the Index Provider Agreement, as discussed on page 52;
the Transfer Agency and Service Agreement, as discussed on page
54; and
the Subscription Agreement, as discussed on page 61.
Alternatively, please tell us why you are not required to do so.
Please refer to Item 601 of
Regulation S-K.
Gregory D. King
Osprey Bitcoin Trust
August 5, 2021
Page 9
General
51. You state that the Trust s investment objective is for the Units to
reflect the value of the
Bitcoin held by the Trust, less the Trust s expenses and other
liabilities. Please discuss in
your registration statement the extent to which the Trust has met its
investment objective
in light of the difference between the trading price of the Units on
the OTCQX (and OTC
Markets) as compared to the Trust's NAV per Unit, as you disclose on
page 48.
52. We note your disclosure on the cover page that Theorem Fund Services
is the
administrator of the Trust. Please revise to discuss whether the Trust
has entered into any
agreement with the Administrator. If applicable, please revise to
disclose the material
terms and conditions of such agreement. File such agreement as an
exhibit to your
registration statement, or tell us why this is not required. Please
also discuss in greater
detail the services the Administrator will provide to the Trust. In
this regard, we note your
disclosure on page 22 that the Administrator will determine the NAV of
the Trust and the
NAV per Unit on a daily basis.
53. Please expand your disclosure to include a section explaining how the
Trust's NAV will
be calculated. Also please explain how the Administrator will accrue
and allocate
expenses and liabilities of the Trust for purposes of calculating the
NAV.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Michael Volley at 202-551-3437 or Amit Pande at
202-551-3423 if you
have questions regarding comments on the financial statements and related
matters. Please
contact David Lin at 202-551-3552 or John Dana Brown at 202-551-3859 with any
other
questions.
FirstName LastNameGregory D. King Sincerely,
Comapany NameOsprey Bitcoin Trust
Division of
Corporation Finance
August 5, 2021 Page 9 Office of
Finance
FirstName LastName