United States securities and exchange commission logo
December 6, 2023
Hany Rashwan
Chief Executive Officer
Ark 21Shares Bitcoin ETF
c/o 21Shares US LLC
477 Madison Avenue
New York, NY 10022
Re: Ark 21Shares
Bitcoin ETF
Amendment No. 3 to
Registration Statement on Form S-1
Filed November 20,
2023
File No. 333-257474
Dear Hany Rashwan:
We have reviewed your amended registration statement and have the
following
comments.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe a comment applies to your
facts and circumstances
or do not believe an amendment is appropriate, please tell us why in
your response.
After reviewing any amendment to your registration statement and
the information you
provide in response to this letter, we may have additional comments.
Unless we note otherwise,
any references to prior comments are to comments in our November 2, 2023
letter.
Amendment No. 3 to Registration Statement on Form S-1
Prospectus Summary
Pricing Information Available on the Exchange and Other Sources, page 4
1. Refer to your response
to comment 8. On page 4, you state that the "list of exchanges on
which the Trust
executes transactions may evolve from time to time, and the Index
Provider may make
changes to the Constituent Exchanges comprising the Index from time
to time for this or
other reasons." Please revise to clarify, if true, that the exchanges on
which the Trust
executes transactions do not impact the Constituent Exchanges
comprising the Index.
Hany Rashwan
FirstName LastNameHany
Ark 21Shares Bitcoin ETF Rashwan
Comapany6,
December NameArk
2023 21Shares Bitcoin ETF
December
Page 2 6, 2023 Page 2
FirstName LastName
The Sub-Adviser, page 5
2. Please revise to disclose, if true, that:
The Trust, the Sponsor and the service providers will not loan or
pledge the Trust's
assets, nor will the Trust's assets serve as collateral for any
loan or similar
arrangement; and
The Trust will not utilize leverage, derivatives or any similar
arrangements in seeking
to meet its investment objective.
The Trust's Fees and Expenses, page 7
3. Refer to your response to comment 11. On page 7, you disclose that
"[c]ertain of the
Sponsor-paid Expenses, such as ordinary course legal fees and
expenses, are capped."
Please revise to disclose all of the Sponsor-paid Expenses that are
capped, and disclose the
capped amount.
The Sponsor may need to find and appoint a replacement custodian, page 43
4. Please revise this risk factor to address the risks associated with
having to replace the
Prime Broker. Please also revise either here or in the risk factor
disclosure in the first
paragraph on page 31 to address the risks associated with the
insolvency, business failure
or interruption, default, failure to perform, security breach, or
other problems affecting the
Prime Broker or the Bitcoin Custodian.
The Trust and Bitcoin Prices
Use of the CME CF Bitcoin Reference Rate -- New York Variant, page 64
5. Refer to your response to comment 25. Please identify the changes to
the Constituent
Exchanges, and include a brief description of the reason for the
changes.
Net Asset Value Determinations
Calculation of NAV and NAV per Share, page 68
6. Refer to your response to comment 27. In particular, we note your
disclosure on page 39
that "if the Sponsor determines in good faith that the Index does not
reflect an accurate
bitcoin price, then the Administrator will employ an alternative
method to determine the
fair value of the Trust s assets" and your disclosure that "[t]here
are no predefined criteria
to make a good faith assessment as to which of the rules the Sponsor
will apply." Please
disclose the list of "alternative methods" that the Administrator may
use to determine the
NAV of the Trust and the "other rules" the Sponsor will apply in order
for the
Administrator to calculate the NAV.
7. Refer to your response to comment 28. On page 68, you disclose that
"[t]he
Administrator multiplies the last available price of the bitcoin in
the calculation basket by
the amount of bitcoin included in the calculation basket." Please
revise to clarify what
you mean by "last available price" and by "calculation basket" so that
investors
Hany Rashwan
FirstName LastNameHany
Ark 21Shares Bitcoin ETF Rashwan
Comapany6,
December NameArk
2023 21Shares Bitcoin ETF
December
Page 3 6, 2023 Page 3
FirstName LastName
understand how the intra-day indicative value per Share is calculated.
Calculation of Principal Market NAV and Principal Market NAV per Share, page 69
8. We note your response to prior comment 30 and your revised
disclosures. Please address
the following:
We note your disclosure that the Trust only receives bitcoin from
the Authorized
Participant or Liquidity Provider and does not itself transact on
any Digital Asset
Markets. Given this statement, please confirm, and revise your
disclosure to state, if
true, that your principal market analysis is performed from the
perspective of the
Authorized Participant or Liquidity Provider.
In identifying the Trust s principal market, based on your 4
step criteria, you state the
Trust will select an Exchange Market as its principal market.
Clarify for us whether
you anticipate the Trust s principal market will be one in
which you, your Authorized
Participant, or your Liquidity Provider will normally transact
and if not, tell us why.
Refer to ASC 820-10-35-5A.
Termination of the Trust, page 72
9. Refer to your response to comment 32. Please revise to explain here
how the Trust's
bitcoin will be sold in connection with the termination of the Trust.
Custody of the Trust's Assets, page 78
10. Refer to your responses to comments 10 and 34. You disclose on page 78
that
"[t]he Bitcoin Custodian will keep custody of all of the Trust s
bitcoin, other than that
which is maintained in the Trading Balance with the Prime Broker, in
the Vault Balance."
Please revise to disclose whether the "Vault Balance" refers to cold
storage. In addition,
we note your disclosure that you will keep a substantial portion of
the private keys in cold
storage. Please disclose what you mean by "substantial portion." Also,
disclose whether
there are any limits or policies that would limit the amount of
bitcoin that can be held
temporarily in the Trading Balance maintained by the Prime Broker. On
page 79, you
disclose that "[t]he Bitcoin Custodian may terminate the Custodial
Services Agreement
for any reason upon providing the applicable notice to the Trust, or
immediately for Cause
(as defined in the Custodial Services Agreement), including, among
others, if the Trust:
materially breaches the Prime Broker Agreement and such breach remains
uncured, or
undergoes a bankruptcy event." Please revise to clarify why the
Custodial Service
Agreement may be terminated if the Trust materially breaches the Prime
Broker
Agreement. Also, please disclose the term of the Custodial Services
Agreement, and
disclose the material terms of the Cash Custody Agreement, including
the term and
termination provisions. Further, please disclose the instructions the
Sponsor provided to
the Bitcoin Custodian regarding forks and airdrops, if any, and
disclose whether the
insurance provider or any other entity will be responsible for
verifying the existence of the
bitcoin.
Hany Rashwan
FirstName LastNameHany
Ark 21Shares Bitcoin ETF Rashwan
Comapany6,
December NameArk
2023 21Shares Bitcoin ETF
December
Page 4 6, 2023 Page 4
FirstName LastName
Prime Broker, page 80
11. Refer to your response to comment 31. We note that the Trading Balance
is held across a
combination of omnibus hot wallets, omnibus cold wallets or in
accounts in the Prime
Broker s name on a trading venue (including third-party venues and
the Prime Broker s
own execution venue) where the Prime Broker executes orders to buy and
sell bitcoin on
behalf of clients (each such venue, a Connected Trading Venue). Please
disclose the
percentage of the Trading Balance held in each or the policies related
to where the
Trading Balance is held. Please disclose why and under what
circumstances the Trust will
utilize the Prime Broker in connection with creations and redemptions
and describe the
mechanics of the Prime Broker's role in creations and redemptions. In
addition, identify
the Connected Trading Venues, how the Prime Broker selects the
Connecting Trading
Venues, whether the Trust may direct the Prime Broker to use a
specific Connected
Trading Venue and the policies and procedures that the Prime Broker
has in place to
mitigate conflicts of interest when executing on behalf of the Trust.
Further, disclose
whether the Prime Broker has insurance coverage and the degree to
which the insurance
policy protects the Trust's assets held by the Prime Broker.
12. We note your disclosure on page 80 that "[o]nce the Sponsor places an
order to purchase
or sell bitcoin on the Trading Platform, the associated bitcoin or
cash used to fund or fill
the order, if any, will be placed on hold and will generally not be
eligible for other use or
withdrawal from the Trust s Trading Balance." Please revise to
explain under what
circumstances the Trust would need to engage in the purchase of
bitcoin.
13. Please disclose the termination provisions and the term of the Prime
Broker Agreement.
In this regard, we note your disclosure on page 81 that "[t]he Prime
Broker is permitted to
suspend or terminate the Prime Broker Agreement under certain
circumstances."
Seed Capital Investor, page 84
14. Please describe how the proceeds from the sale of the Seed Creation
Baskets will be
converted to bitcoin, including any costs or transaction fees payable
by the Trust
associated with such conversion.
Creation and Redemption of Shares, page 86
15. Refer to your response to comment 38. Please revise to disclose why
and under what
circumstances the Authorized Participants will use Liquidity Providers
to deliver the
bitcoin to the Trust's Bitcoin Custodian or the Prime Broker, and
please identify the
Liquidity Providers, if known. Also revise to disclose why and under
what circumstances
the Bitcoin Custodian will deliver the bitcoin to the Liquidity
Providers in connection with
redemptions. In addition, disclose whether the Authorized Participants
and Liquidity
Providers must have an account with the Prime Broker. Please disclose
when the bitcoin
is transferred from the Prime Broker to the Bitcoin Custodian, or vice
versa, in connection
with creations and redemptions.
Hany Rashwan
Ark 21Shares Bitcoin ETF
December 6, 2023
Page 5
16. Refer to your response to comment 39. Please revise to disclose
whether and how you
will notify Shareholders if the Trust has suspended creations and
redemptions and
describe the potential impact of suspending creations and redemptions.
Conflicts of Interest, page 93
17. Please address material conflicts of interest between the Seed Capital
Investor and the
Trust. In addition, please disclose the relationship between the Seed
Capital Investor and
the Sponsor.
Governing Law; Consent to Delaware Jurisdiction, page 102
18. Refer to your response to comment 41. Please revise to disclose that
there is uncertainty
as to whether a court would enforce the exclusive forum jurisdiction
for actions arising
under the Securities Act or Exchange Act.
Material Contracts, page 103
19. Refer to your response to comment 42. Please revise to disclose the
material terms of
your agreement with the Administrator, the Sub-Adviser, and the Cash
Custodian.
Please contact Kate Tillan at 202-551-3604 or Michelle Miller at
202-551-3368 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Sonia Bednarowski at 202-551-3666 or Justin Dobbie at 202-551-3469 with
any other
questions.
FirstName LastNameHany Rashwan Sincerely,
Comapany NameArk 21Shares Bitcoin ETF
Division of
Corporation Finance
December 6, 2023 Page 5 Office of Crypto
Assets
FirstName LastName