Correspondence 0001839882-23-028806 from CoinShares Valkyrie Bitcoin Fund (BRRR) (CIK 0001841175) (BRRR)
CoinShares Valkyrie Bitcoin Fund (BRRR) (CIK 0001841175)
Date: Oct. 30, 2023 · CIK: 0001841175 · Accession: 0001839882-23-028806
AI Filing Summary & Sentiment
File numbers found in text: 333-254652
Letter
Via EDGAR Correspondence United States Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Re: Valkyrie Bitcoin Fund File No. 333-254652
Dear Mss. Bednarowski and Berkheimer:
This letter responds to your comments regarding the registration statement filed on Form S-1 for the Valkyrie Bitcoin Fund (the “Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”) on June 21, 2023 (the “Registration Statement”). Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statement.
Comment 1 – General
Based on our preliminary review of your registration statement, we have the following initial set of comments. Once you have amended your registration statement and responded to each of these comments, we will provide you with more detailed comments relating to your registration statement, as appropriate.
Response to Comment 1
The Sponsor, on behalf of the Trust, acknowledges the comments and looks forward to working with the Staff. The Sponsor, on behalf of the Trust, has filed Amendment No. 3 to the Registration Statement (the “Amendment”) on or about the date hereof in order to respond to the Staff’s comments and make other updates to the Registration Statement to reflect developments since the time the Registration Statement was originally filed.
Charlotte Chicago New York Salt Lake City San Francisco Washington, DC
United States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 2
Comment 2 – General
Please disclose all omitted information as soon as it has been determined. By way of example, we note that you omit the identification of the initial Authorized Participant, the Exchange, the Transfer Agent, the Marketing Agent and the cash custodian, as well as inclusion of the material agreements as exhibits to the Registration Statement. Please revise to include this information in a subsequent amendment to the Registration Statement. Please also acknowledge that the Staff will need sufficient time to review this information when it is included in a subsequent amendment.
Response to Comment 2
Pursuant to the Staff’s request, the Registration Statement and the preliminary prospectus included therein have been updated to disclose all information available at this time. Remaining omitted information will be disclosed in a further pre-effective amendment to the Registration Statement as soon as practicable but in any case before the Sponsor, on behalf of the Trust, requests acceleration of the effectiveness of the Registration Statement. The Sponsor will endeavor to include forms of omitted exhibits in one or more further pre-effective amendment to the Registration Statement as soon as practicable. The Sponsor confirms the Registration Statement will be amended with executed agreements prior to the time of its request for acceleration of effectiveness of the Registration Statement. The Sponsor acknowledges that the Staff will need time to review such information.
Comment 3 – General
The Staff refers the Trust to the Staff’s December 2022 Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets, located at the following address: https://www.sec.gov/corpfin/sample-letter-companies-regarding-crypto-asset-markets. Please consider the issues identified in the sample letter as applicable to the Trust’s facts and circumstances and revise the disclosure accordingly.
A. Provide disclosure of any significant crypto asset market developments material to understanding or assessing your business, financial condition and results of operations, or share price since your last reporting period, including any material impact from the price volatility of crypto assets.
B. To the extent material, discuss how the bankruptcies of XX and XX and the downstream effects of those bankruptcies have impacted or may impact your business, financial condition, customers, and counterparties, either directly or indirectly. Clarify whether you have material assets that may not be recovered due to the bankruptcies or may otherwise be lost or misappropriated.
United States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 3
C. If material to an understanding of your business, describe any direct or indirect exposures to other counterparties, customers, custodians, or other participants in crypto asset markets known to:
o Have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit of creditors, or have had a receiver appointed for them.
o Have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets.
o Have the crypto assets of their customers unaccounted for.
o Have experienced material corporate compliance failures.
D. If material to an understanding of your business, discuss any steps you take to safeguard your customers’ crypto assets and describe any policies and procedures that are in place to prevent self-dealing and other potential conflicts of interest. Describe any policies and procedures you have regarding the commingling of assets, including customer assets, your assets, and those of affiliates or others. Identify what material changes, if any, have been made to your processes in light of the current crypto asset market disruption.
E. Disclose whether you have experienced excessive redemptions or withdrawals, or have suspended redemptions or withdrawals, of crypto assets and explain the potential effects on your financial condition and liquidity.
F. We note that you own or have issued crypto assets and/or hold crypto assets on behalf of third parties. To the extent material, explain whether these crypto assets serve as collateral for any loan, margin, rehypothecation, or other similar activities to which you or your affiliates are a party. If so, identify and quantify the crypto assets used in these financing arrangements and disclose the nature of your relationship for loans with parties other than third-parties. State whether there are any encumbrances on the collateral. Discuss whether the current crypto asset market disruption has affected the value of the underlying collateral.
United States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 4
G. To the extent material, explain whether, to your knowledge, crypto assets you have issued serve as collateral for any other person’s or entity’s loan, margin, rehypothecation or similar activity. If so, discuss whether the current crypto asset market disruption has impacted the value of the underlying collateral and explain any material financing and liquidity risk this raises for your business.
H. Describe any material risk to you, either direct or indirect, due to excessive redemptions, withdrawals, or a suspension of redemptions or withdrawals, of crypto assets. Identify any material concentrations of risk and quantify any material exposures.
I. To the extent material, discuss any reputational harm you may face in light of the recent disruption in the crypto asset markets. For example, discuss how market conditions have affected how your business is perceived by customers, counterparties, and regulators, and whether there is a material impact on your operations or financial condition.
J. We note that you are not authorized or permitted to offer your products and services to customers outside of the jurisdictions where you have obtained the required governmental licenses and authorizations. Describe any material risks you face from unauthorized or impermissible customer access to your products and services outside of those jurisdictions. Describe any steps you take to restrict access of U.S. persons to your products and services and any related material risks.
K. Describe any material risks to your business from the possibility of regulatory developments related to crypto assets and crypto asset markets. Identify material pending crypto legislation or regulation and describe any material effects it may have on your business, financial condition, and results of operations.
L. Describe any material risks you face related to the assertion of jurisdiction by U.S. and foreign regulators and other government entities over crypto assets and crypto asset markets.
M. Describe any material risks related to safeguarding your, your affiliates’, or your customers’ crypto assets. Describe any material risks to your business and financial condition if your policies and procedures surrounding the safeguarding of crypto assets, conflicts of interest, or comingling of assets are not effective.
United States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 5
N. To the extent material, describe any gaps your board or management have identified with respect to risk management processes and policies in light of current crypto asset market conditions as well as any changes they have made to address those gaps.
O. Describe any material financing, liquidity, or other risks you face related to the impact that the current crypto asset market disruption has had, directly or indirectly, on the value of the crypto assets you use as collateral or the value of your crypto assets used by others as collateral.
P. To the extent material, describe any of the following risks due to disruptions in the crypto asset markets:
o Risk from depreciation in your stock price.
o Risk of loss of customer demand for your products and services.
o Financing risk, including equity and debt financing.
o Risk of increased losses or impairments in your investments or other assets.
o Risks of legal proceedings and government investigations, pending or known to be threatened, in the United States or in other jurisdictions against you or your affiliates.
o Risks from price declines or price volatility of crypto assets.
Response to Comment 3
Please refer to the Trust’s responses below.
A. The Trust refers the Staff to the “Risk Factors” section, and more specifically, the risk factor entitled “Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity,” which discusses the implications of recent developments in the crypto asset market. As the Trust has no operating history, these developments have not had any impact on the financial condition and results of operations. To the extent similar events occur in the future and have such an impact, appropriate disclosure would be included in the Trust’s periodic reports filed pursuant to the Securities Exchange Act of 1934 of in a prospectus or prospectus supplement, as applicable.
United States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 6
B. The Trust has not yet commenced operations. Besides the events regarding Coinbase that are disclosed in the prospectus, the Sponsor confirms that none of the service providers that the Trust has engaged or contemplates engaging have been materially affected by any prominent bankruptcies and other notable events in the digital asset industry, including, for the avoidance of doubt, events surrounding FTX and Terra Labs. However, the Amendment includes significant disclosure of these events and their effect on bitcoin, digital assets, and the digital asset industry generally.
C. The Trust refers the Staff to its response to Response 3(B) above.
D. With respect to the safeguarding of the Trust’s crypto assets, the Sponsor refers the Staff to the disclosure in the prospectus under the heading “Custody of the Trust’s Bitcoin”, which includes a description of the safekeeping procedures used by the Trust’s Custodian to hold the Trust’s bitcoin. With respect to policies and procedures that are in place to prevent self-dealing and other potential conflicts of interest, the Sponsor refers the Staff to the disclosure in the prospectus under the heading “Conflicts of Interest” and the response to Comment 9 below.
E. As the Trust has not commenced operations, this comment is inapplicable to the Trust and the Registration Statement.
F. The Trust will not issue crypto assets or hold crypto assets on behalf of third parties. Accordingly, the Sponsor does not believe this comment is applicable to the Trust and the Registration Statement.
G. The Trust will not issue crypto assets. Accordingly, the Sponsor does not believe this comment is applicable to the Trust and the Registration Statement.
H. The Trust refers the Staff to the sections entitled “Risk Factors” and “Suspension or Rejection of Redemption Orders” in the Registration Statement, which discuss the risks of excessive redemptions, withdrawals, or a suspension of redemptions or withdrawals. In particular, please refer to the Risk Factor “The postponement, suspension or rejection of creation or redemption orders may adversely affect an investment in the Shares.”
United States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 7
I. The sole purpose of the Trust is to hold bitcoin for the benefit of its Shareholders. The Trust does not engage in any other activities in the crypto asset markets. Therefore, the Sponsor does not view the risk of any reputational harm as material in light of the circumstances. The Registration Statement includes disclosure on how disruptions such as those recently experienced in crypto asset markets could affect bitcoin, digital assets, and the digital asset industry. For example, please refer to the Risk Factor “The trading prices of many digital assets, including bitcoin, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further declines in the trading prices of bitcoin, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.”
J. The Shares of the Trust are offered and sold only to Authorized Participants who are registered broker-dealers under the Securities Exchange Act of 1934, members of the Financial Industry Regulatory Authority Inc. and have been confirmed to be U.S. Persons.
K. The Trust refers the Staff to the section entitled “Risk Factors” in the Registration Statement, including, but not limited to the following risk factors: “Adoption of new laws and regulations, or changes to existing laws and regulations, applicable to Bitcoin could negatively effect the value of Bitcoin”; “It may be illegal now, or in the future, to acquire, own, hold, sell or use digital assets in one or more countries”; and “Future regulations may require the Trust or the Sponsor to become registered, which may cause the Trust to liquidate.”
L. The Trust re
Show Raw Text
CORRESP
1
filename1.htm
Morrison
C. Warren
Partner
Chapman
and Cutler LLP
320
South Canal Street, 27th Floor
Chicago,
Illinois 60606
T
312.845.3000
D
312.845.3484
F
312.451.2366
warren@chapman.com
October
30, 2023
Via
EDGAR Correspondence
United
States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Re:
Valkyrie
Bitcoin Fund
File
No. 333-254652
Dear
Mss. Bednarowski and Berkheimer:
This
letter responds to your comments regarding the registration statement filed on Form S-1 for the Valkyrie Bitcoin Fund (the
“Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”) on June 21, 2023 (the “Registration Statement”). Capitalized terms used herein, but not otherwise defined, have the
meanings ascribed to them in the Registration Statement.
Comment
1 – General
Based
on our preliminary review of your registration statement, we have the following initial set of comments. Once you have amended
your registration statement and responded to each of these comments, we will provide you with more detailed comments relating
to your registration statement, as appropriate.
Response
to Comment 1
The
Sponsor, on behalf of the Trust, acknowledges the comments and looks forward to working with the Staff. The Sponsor, on behalf
of the Trust, has filed Amendment No. 3 to the Registration Statement (the “Amendment”) on or about the date
hereof in order to respond to the Staff’s comments and make other updates to the Registration Statement to reflect developments
since the time the Registration Statement was originally filed.
Charlotte
Chicago New York Salt Lake City San Francisco Washington,
DC
United
States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 2
Comment
2 – General
Please
disclose all omitted information as soon as it has been determined. By way of example, we note that you omit the identification
of the initial Authorized Participant, the Exchange, the Transfer Agent, the Marketing Agent and the cash custodian, as well as
inclusion of the material agreements as exhibits to the Registration Statement. Please revise to include this information in a
subsequent amendment to the Registration Statement. Please also acknowledge that the Staff will need sufficient time to review
this information when it is included in a subsequent amendment.
Response
to Comment 2
Pursuant
to the Staff’s request, the Registration Statement and the preliminary prospectus included therein have been updated to
disclose all information available at this time. Remaining omitted information will be disclosed in a further pre-effective amendment
to the Registration Statement as soon as practicable but in any case before the Sponsor, on behalf of the Trust, requests acceleration
of the effectiveness of the Registration Statement. The Sponsor will endeavor to include forms of omitted exhibits in one or more
further pre-effective amendment to the Registration Statement as soon as practicable. The Sponsor confirms the Registration Statement
will be amended with executed agreements prior to the time of its request for acceleration of effectiveness of the Registration
Statement. The Sponsor acknowledges that the Staff will need time to review such information.
Comment
3 – General
The
Staff refers the Trust to the Staff’s December 2022 Sample Letter to Companies Regarding Recent Developments in Crypto Asset
Markets, located at the following address: https://www.sec.gov/corpfin/sample-letter-companies-regarding-crypto-asset-markets.
Please consider the issues identified in the sample letter as applicable to the Trust’s facts and circumstances and revise
the disclosure accordingly.
A. Provide disclosure of any significant crypto asset market developments material
to understanding or assessing your business, financial condition and results of operations, or share price since your last
reporting period, including any material impact from the price volatility of crypto assets.
B. To the extent material, discuss how the bankruptcies of XX and XX and the
downstream effects of those bankruptcies have impacted or may impact your business, financial condition, customers, and
counterparties, either directly or indirectly. Clarify whether you have material assets that may not be recovered due to the
bankruptcies or may otherwise be lost or misappropriated.
United
States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 3
C. If material to an understanding of your business, describe any direct or
indirect exposures to other counterparties, customers, custodians, or other participants in crypto asset markets known
to:
o Have
filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the
benefit of creditors, or have had a receiver appointed for them.
o Have
experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets.
o Have
the crypto assets of their customers unaccounted for.
o Have
experienced material corporate compliance failures.
D.
If material to an understanding of your business, discuss any steps you take to safeguard your
customers’ crypto assets and describe any policies and procedures that are in place to prevent self-dealing and other
potential conflicts of interest. Describe any policies and procedures you have regarding the commingling of assets, including
customer assets, your assets, and those of affiliates or others. Identify what material changes, if any, have been made to
your processes in light of the current crypto asset market disruption.
E.
Disclose whether you have experienced excessive redemptions or withdrawals, or have suspended
redemptions or withdrawals, of crypto assets and explain the potential effects on your financial condition and
liquidity.
F.
We note that you own or have issued crypto assets and/or hold crypto assets on behalf of third parties. To
the extent material, explain whether these crypto assets serve as collateral for any loan, margin, rehypothecation, or other
similar activities to which you or your affiliates are a party. If so, identify and quantify the crypto assets used in these
financing arrangements and disclose the nature of your relationship for loans with parties other than third-parties. State
whether there are any encumbrances on the collateral. Discuss whether the current crypto asset market disruption has affected
the value of the underlying collateral.
United
States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 4
G.
To the extent material, explain whether, to your knowledge, crypto assets you have issued serve as collateral for
any other person’s or entity’s loan, margin, rehypothecation or similar activity. If so, discuss whether the
current crypto asset market disruption has impacted the value of the underlying collateral and explain any material financing
and liquidity risk this raises for your business.
H.
Describe any material risk to you, either direct or indirect, due to excessive redemptions,
withdrawals, or a suspension of redemptions or withdrawals, of crypto assets. Identify any material concentrations of risk
and quantify any material exposures.
I. To
the extent material, discuss any reputational harm you may face in light of the recent disruption in the crypto asset markets.
For example, discuss how market conditions have affected how your business is perceived by customers, counterparties, and regulators,
and whether there is a material impact on your operations or financial condition.
J. We
note that you are not authorized or permitted to offer your products and services to customers outside of the jurisdictions where
you have obtained the required governmental licenses and authorizations. Describe any material risks you face from unauthorized
or impermissible customer access to your products and services outside of those jurisdictions. Describe any steps you take to
restrict access of U.S. persons to your products and services and any related material risks.
K. Describe
any material risks to your business from the possibility of regulatory developments related to crypto assets and crypto asset
markets. Identify material pending crypto legislation or regulation and describe any material effects it may have on your business,
financial condition, and results of operations.
L. Describe
any material risks you face related to the assertion of jurisdiction by U.S. and foreign regulators and other government entities
over crypto assets and crypto asset markets.
M. Describe
any material risks related to safeguarding your, your affiliates’, or your customers’ crypto assets. Describe any
material risks to your business and financial condition if your policies and procedures surrounding the safeguarding of crypto
assets, conflicts of interest, or comingling of assets are not effective.
United
States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 5
N. To
the extent material, describe any gaps your board or management have identified with respect to risk management processes and
policies in light of current crypto asset market conditions as well as any changes they have made to address those gaps.
O. Describe
any material financing, liquidity, or other risks you face related to the impact that the current crypto asset market disruption
has had, directly or indirectly, on the value of the crypto assets you use as collateral or the value of your crypto assets used
by others as collateral.
P.
To the extent material, describe any of the following risks due to disruptions in the crypto asset
markets:
o Risk
from depreciation in your stock price.
o Risk
of loss of customer demand for your products and services.
o Financing
risk, including equity and debt financing.
o Risk
of increased losses or impairments in your investments or other assets.
o Risks
of legal proceedings and government investigations, pending or known to be threatened,
in the United States or in other jurisdictions against you or your affiliates.
o Risks
from price declines or price volatility of crypto assets.
Response
to Comment 3
Please
refer to the Trust’s responses below.
A. The
Trust refers the Staff to the “Risk Factors” section, and more specifically, the risk factor entitled “Recent
developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence
in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide
declines in liquidity,” which discusses the implications of recent developments in the crypto asset market. As the
Trust has no operating history, these developments have not had any impact on the financial condition and results of operations.
To the extent similar events occur in the future and have such an impact, appropriate disclosure would be included in the Trust’s
periodic reports filed pursuant to the Securities Exchange Act of 1934 of in a prospectus or prospectus supplement, as applicable.
United
States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 6
B. The Trust has not yet commenced operations. Besides the events regarding Coinbase that are
disclosed in the prospectus, the Sponsor confirms that none of the service providers that the Trust has engaged or contemplates
engaging have been materially affected by any prominent bankruptcies and other notable events in the digital asset industry,
including, for the avoidance of doubt, events surrounding FTX and Terra Labs. However, the Amendment includes significant disclosure
of these events and their effect on bitcoin, digital assets, and the digital asset industry generally.
C. The
Trust refers the Staff to its response to Response 3(B) above.
D. With
respect to the safeguarding of the Trust’s crypto assets, the Sponsor refers the Staff to the disclosure in the prospectus
under the heading “Custody of the Trust’s Bitcoin”, which includes a description of the safekeeping procedures
used by the Trust’s Custodian to hold the Trust’s bitcoin. With respect to policies and procedures that are in place
to prevent self-dealing and other potential conflicts of interest, the Sponsor refers the Staff to the disclosure in the prospectus
under the heading “Conflicts of Interest” and the response to Comment 9 below.
E. As the Trust has not commenced operations, this comment is inapplicable to the Trust and the Registration
Statement.
F. The
Trust will not issue crypto assets or hold crypto assets on behalf of third parties. Accordingly, the Sponsor does not believe
this comment is applicable to the Trust and the Registration Statement.
G. The
Trust will not issue crypto assets. Accordingly, the Sponsor does not believe this comment is applicable to the Trust and the
Registration Statement.
H. The
Trust refers the Staff to the sections entitled “Risk Factors” and “Suspension or Rejection of Redemption Orders”
in the Registration Statement, which discuss the risks of excessive redemptions, withdrawals, or a suspension of redemptions or
withdrawals. In particular, please refer to the Risk Factor “The postponement, suspension
or rejection of creation or redemption orders may adversely affect an investment in the Shares.”
United
States Securities and Exchange Commission
Division of Corporation Finance
October 30, 2023
Page 7
I. The
sole purpose of the Trust is to hold bitcoin for the benefit of its Shareholders. The Trust does not engage in any other activities
in the crypto asset markets. Therefore, the Sponsor does not view the risk of any reputational harm as material in light of the
circumstances. The Registration Statement includes disclosure on how disruptions such as those recently experienced in crypto
asset markets could affect bitcoin, digital assets, and the digital asset industry. For example, please refer to the Risk Factor
“The trading prices of many digital assets, including bitcoin, have experienced extreme
volatility in recent periods and may continue to do so. Extreme volatility in the future, including further declines in the trading
prices of bitcoin, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially
all of their value.”
J. The
Shares of the Trust are offered and sold only to Authorized Participants who are registered broker-dealers under the Securities
Exchange Act of 1934, members of the Financial Industry Regulatory Authority Inc. and have been confirmed to be U.S. Persons.
K. The
Trust refers the Staff to the section entitled “Risk Factors” in the Registration Statement, including, but not limited
to the following risk factors: “Adoption of new laws and regulations, or changes to existing laws and regulations,
applicable to Bitcoin could negatively effect the value of Bitcoin”; “It may be illegal now, or in the
future, to acquire, own, hold, sell or use digital assets in one or more countries”; and “Future regulations
may require the Trust or the Sponsor to become registered, which may cause the Trust to liquidate.”
L. The
Trust re