ADMINISTRATIVE PROCEEDING

File No. 3-17335

SecondMarket, Inc. and Bitcoin Investment Trust (BIT) Settle Charges Relating to 

Unlawful Redemptions of BIT Shares during a Continuous Distribution

July 11, 2016 – The Securities and Exchange Commission today announced that SecondMarket, 

Inc., a New York broker-dealer registered with the Commission, and Bitcoin Investment Trust 

(BIT), a Delaware trust whose sole assets are bitcoins, have agreed to settle charges that they 

respectively violated Rules 101 and 102 of Regulation M under the Securities Exchange Act of 

1934 in connection with their purchases of BIT shares during a continuous distribution. 

The SEC’s Rule 101 of Regulation M prohibits distribution participants and their affiliated 

purchasers from purchasing any security that is the subject of a distribution until after the 

applicable restricted period. Rule 102 prohibits the same activity by issuers, selling security 

holders, and their affiliated purchasers.

An SEC investigation found that on September 25, 2013, BIT began offering its shares to 

accredited investors on a continuous basis pursuant to Rule 506(c) of Regulation D under the 

Securities Act of 1933. Because of the size of the offering and the special selling efforts and 

methods used to facilitate the offering, the offering constituted a distribution. On March 19, 

2014, BIT announced to shareholders that it would implement a shareholder redemption program 

for shares redeemed within one year of purchase. On April 1, 2014, through its affiliate and 

Authorized Participant (AP) SecondMarket, BIT began accepting orders to redeem shares from 

BIT shareholders. Between April 2 and September 4, 2014, SecondMarket, as BIT’s AP, 

purchased 85,721 BIT shares from BIT shareholders and earned redemption fees. These 

purchases of BIT shares occurred during a continuous distribution of BIT shares and, therefore, 

violated Rule 101 of Regulation M under the Exchange Act. 

The SEC’s investigation further found that, from the time BIT was formed, SecondMarket could 

redeem shares (purchased in its capacity as BIT’s AP and for its own proprietary account)

without any restrictions. Between November 4, 2013 and September 4, 2014, BIT purchased 

6,479 BIT shares from SecondMarket. BIT’s purchases occurred during a continuous 

distribution of BIT shares and, therefore, violated Rule 102 of Regulation M under the Exchange 

Act.

The SEC’s order finds that SecondMarket violated Rule 101 and BIT violated Rule 102 of 

Regulation M under the Exchange Act. Without admitting or denying the findings, 

SecondMarket and BIT agreed to a cease-and-desist order against future violations of Rules 101 

and 102 of Regulation M of the Exchange Act respectively. SecondMarket also agreed to pay 

disgorgement of $51,650.11 in redemption fees it collected, plus prejudgment interest of 

$2,105.68, for a total of $53,755.79. In determining to accept their offers of settlement, the SEC

considered SecondMarket’s and BIT’s reliance on counsel regarding the development and 

implementation of BIT’s shareholder redemption program.

The SEC’s investigation was conducted by Daphna A. Waxman and Valerie A. Szczepanik and 

was supervised by Lara S. Mehraban, all of the New York Regional Office. An SEC 
examination of SecondMarket that led to the investigation was conducted by members of the 

New York office’s broker-dealer examination staff.

See also: Order