Correspondence 0001193125-23-257757 from Fidelity Wise Origin Bitcoin Fund (FBTC)
Fidelity Wise Origin Bitcoin Fund
Date: Oct. 17, 2023 · CIK: 0001852317 · Accession: 0001193125-23-257757
AI Filing Summary & Sentiment
Reasoning
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. Re: Wise Origin Bitcoin Trust 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 Wise Origin Bitcoin Trust (the “Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”) on March 24, 2021 (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 Pre-Effective Amendment No. 1 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.
United States Securities and Exchange Commission
Division of Corporation Finance
October 17, 2023
Page
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.
United States Securities and Exchange Commission
Division of Corporation Finance
October 17, 2023
Page
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.
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:
•
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.
•
Have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets.
•
Have the crypto assets of their customers unaccounted for.
•
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 17, 2023
Page
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.
United States Securities and Exchange Commission
Division of Corporation Finance
October 17, 2023
Page
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.
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:
•
Risk from depreciation in your stock price.
•
Risk of loss of customer demand for your products and services.
•
Financing risk, including equity and debt financing.
•
Risk of increased losses or impairments in your investments or other assets.
•
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.
•
Risks from price declines or price volatility of crypto assets.
United States Securities and Exchange Commission
Division of Corporation Finance
October 17, 2023
Page
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.
B. The Trust has not yet commenced operations. 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. The Sponsor also notes that the disclosure has been updated to describe the recent regulatory events surrounding Binance and the effects those have had on the digital asset industry generally.
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 Assets”, 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 12 below.
United States Securities and Exchange Commission
Division of Corporation Finance
October 17, 2023
Page
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 Factors “The Trust is new, and if it is not profitable, the Trust may terminate and liquidate at a time that is disadvantageous to Shareholders,” and “Shareholders may be adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection under certain circumstances.”
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.
United States Securities and Exchange Commission
Division of Corporation Finance
October 17, 2023
Page
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: “Regulatory Risk”, “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 refers the Staff to the section entitled “Risk Factors” in the Registration Statement, including, but not limited to the following risk factors: “Regulatory Risk” and “Future and current regulations by a United States or foreign government or quasi-governmental agencies could have an adverse effect on an investment in the Trust.”
M. The Trust refers the Staff to the following Sections of the Registration Sta
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CORRESP 1 filename1.htm CORRESP 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 17, 2023 VIA EDGAR CORRESPONDENCE United States Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Re: Wise Origin Bitcoin Trust 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 Wise Origin Bitcoin Trust (the “Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”) on March 24, 2021 (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 Pre-Effective Amendment No. 1 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. United States Securities and Exchange Commission Division of Corporation Finance October 17, 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. United States Securities and Exchange Commission Division of Corporation Finance October 17, 2023 Page 3 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. 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: • 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. • Have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets. • Have the crypto assets of their customers unaccounted for. • 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 17, 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. United States Securities and Exchange Commission Division of Corporation Finance October 17, 2023 Page 5 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. 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: • Risk from depreciation in your stock price. • Risk of loss of customer demand for your products and services. • Financing risk, including equity and debt financing. • Risk of increased losses or impairments in your investments or other assets. • 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. • Risks from price declines or price volatility of crypto assets. United States Securities and Exchange Commission Division of Corporation Finance October 17, 2023 Page 6 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. B. The Trust has not yet commenced operations. 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. The Sponsor also notes that the disclosure has been updated to describe the recent regulatory events surrounding Binance and the effects those have had on the digital asset industry generally. 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 Assets”, 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 12 below. United States Securities and Exchange Commission Division of Corporation Finance October 17, 2023 Page 7 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 Factors “The Trust is new, and if it is not profitable, the Trust may terminate and liquidate at a time that is disadvantageous to Shareholders,” and “Shareholders may be adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection under certain circumstances.” 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. United States Securities and Exchange Commission Division of Corporation Finance October 17, 2023 Page 8 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: “Regulatory Risk”, “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 refers the Staff to the section entitled “Risk Factors” in the Registration Statement, including, but not limited to the following risk factors: “Regulatory Risk” and “Future and current regulations by a United States or foreign government or quasi-governmental agencies could have an adverse effect on an investment in the Trust.” M. The Trust refers the Staff to the following Sections of the Registration Sta