Correspondence 0001193125-24-165399 from Fidelity Ethereum Fund (FETH)
Fidelity Ethereum Fund
Date: June 21, 2024 · CIK: 0002000046 · Accession: 0001193125-24-165399
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-278249
Letter
VIA EDGAR CORRESPONDENCE United States Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. Re: Fidelity Ethereum Fund File No. 333-278249
Dear Mss. Paik and Berkheimer:
This letter responds to your comments regarding Amendment No. 2 to the registration statement filed on Form S-1 for the Fidelity Ethereum Fund (the “Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”) on May 31, 2024 (the “Registration Statement”). Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statement.
COMMENT 1 – GENERAL
To the extent that the Trust intends to use a fact sheet, please provide the Staff with a copy for review.
RESPONSE TO COMMENT 1
The Trust confirms that it does not currently intend to use a fact sheet.
COMMENT 2 – COVER PAGE
Please revise the cover page to state that the Trust will not participate in the proof-of-stake validation mechanism of the Ethereum network (i.e., the Trust will not “stake” its ether) to earn additional ether to seek other means of generating income from its ether holdings.
RESPONSE TO COMMENT 2
The Registration Statement has been updated in accordance with the Staff’s comment.
United States Securities and Exchange Commission
Division of Corporation Finance
June 21, 2024
Page
COMMENT 3 – PROSPECTUS SUMMARY
Please revise the Prospectus Summary 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.
RESPONSE TO COMMENT 3
The Registration Statement has been updated in accordance with the Staff’s comment.
COMMENT 4 – PROSPECTUS SUMMARY
Please revise the Prospectus Summary to disclose, if true, that:
•
Disclose that the Trust may only conduct cash creations and redemptions and that it would need regulatory approval to commence in-kind creations and redemptions;
•
Clarify that the timing of in-kind regulatory approval is unknown and that there is no guarantee that the Exchange will receive in-kind regulatory approval; and
•
Disclose how the Trust will inform shareholders if the Exchange receives in-kind regulatory approval and if the Sponsor chooses to allow in-kind creations and redemptions.
RESPONSE TO COMMENT 4
The following disclosure has been added under the caption “Prospectus Summary – Plan of Distribution” in accordance with the Staff’s comment:
As of the date of this Prospectus, the Trust only creates and redeems Shares in exchange for cash. If the Trust were to create or redeem shares in exchange for ether, the Trust would first need to seek certain regulatory approvals, including an amendment to the Exchange’s listing rules and an amendment to the Trust’s registration statement of which this Prospectus forms a part. There
United States Securities and Exchange Commission
Division of Corporation Finance
June 21, 2024
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can be no guarantee that the Trust will be successful in obtaining such regulatory approvals, and the timing of any such approvals is unknown. If the Trust is successful in obtaining the necessary regulatory approvals to allow for creations and redemptions in-kind, the Trust will notify Shareholders in a Prospectus supplement and/or a current report on Form 8-K or in its annual or quarterly reports.
COMMENT 5 – PROSPECTUS SUMMARY
The Staff notes the Trust’s references on pages 3 and 46 that “Shareholders may not receive the benefits of any forks or airdrops” and, on page 69, “Risk factors. – The inability to recognize the economic benefits of a “fork” or an “air drop” could adversely impact an investment in the Trust.” As the Staff is unable to locate those references, please revise to correct. In addition, please include Prospectus Summary disclosure to clarify, if true, that with respect to any fork, airdrop or similar event, the Sponsor will cause the Trust to irrevocably abandon the Incidental Rights or IR Virtual Currency and in the event the Trust seeks to change this position, an application would need to be filed with the SEC by the listing exchange seeking approval to amend its listing rules.
RESPONSE TO COMMENT 5
The references on pages 3 and 46 noted in the Staff’s comment have been corrected to refer to the newly added risk factors “The inability to recognize the economic benefit of a “fork” or an “air drop” could adversely impact an investment in the Trust.” In addition, the following disclosure has been added to under the caption “Prospectus Summary – Summary of Risk Factors – Risks Associated with Investing in the Trust”:
Shareholders of the Trust should not expect to receive the economic benefit of any “fork” of the Ethereum network or asset “air dropped” to holders of ether. Before the Trust claims any digital asset resulting from a fork in the Ethereum network (other than what the Sponsor determines to be ether) or any air drop, the Trust would need to seek and obtain certain regulatory approvals, including an amendment to the Trust’s registration statement of which this Prospectus is a part and approval of an application by the Exchange to amend its listing rules. If such approvals are not obtained, the Sponsor will cause the Trust to irrevocably abandon such digital asset.
United States Securities and Exchange Commission
Division of Corporation Finance
June 21, 2024
Page
COMMENT 6 – THE TRUST’S SERVICE PROVIDERS, THE CUSTODIAN
The Staff notes the Trust’s references to the Custodian Agreement here and in other contexts where there is discussion around the Trust’s ether custodian. The Custodian Agreement appears to be an agreement with the Cash Custodian. Please revise the disclosure to refer to the Custodial Services Agreement and update the discussion regarding the Cash Custodian accordingly.
RESPONSE TO COMMENT 6
The Registration Statement has been updated in accordance with the Staff’s comment.
COMMENT 7 – ETHER, ETHER MARKETS AND REGULATION OF ETHER
Please revise to add a discussion of the spot ether markets and ether futures markets.
RESPONSE TO COMMENT 7
The Registration Statement has been updated in accordance with the Staff’s comment.
COMMENT 8 – SUMMARY OF AN ETHER TRANSACTION
The Staff notes the Trust’s disclosure that a “validator must stake 32 ether to become a validator” and that “each 32 ether that is staked results in issuance of a validatory key pair.” Please expand the disclosure to clarify that staking more ether can increase the numerical chances that a given validator will be randomly selected.
RESPONSE TO COMMENT 8
The Registration Statement has been updated in accordance with the Staff’s comment.
COMMENT 9 – MODIFICATIONS TO THE ETHEREUM PROTOCOL
Please expand the disclosure in this section to describe the planned fork called “Dencun” that the Ethereum network underwent on March 13, 2024.
United States Securities and Exchange Commission
Division of Corporation Finance
June 21, 2024
Page
RESPONSE TO COMMENT 9
The following disclosure has been added in the referenced section in accordance with the Staff’s comment:
On March 13, 2024, the Ethereum network underwent a planned fork called “Dencun” implementing a series of EIPs. EIP 4844, which some commentators perceive to be the most significant EIP within the Dencun series, is intended to improve the economics of Layer 2s by introducing a temporary storage solution, called Binary Large Objects (“blobs”), which is expected to reduce the cost of recording batched transactions on the Ethereum Network. Operators of Layer 2 blockchains now have a choice of using two types of data storage: as temporary blob space stored for 4096 epochs (approximately 18 days) or as permanent smart contract call data. Because the data is pruned from the Ethereum Network new service providers are likely to emerge which store the historical blob data beyond the pruning period. As expected, and immediately following the upgrade, some Layer 2s reported reduced gas fees when batching transactions to the Ethereum network which in turn lowered the transaction costs on the Layer 2. As with any change to software code, planned forks such as Dencun could introduce bugs, coding defects, unanticipated or undiscovered problems, flaws, security risks, problematic incentive structures, or otherwise fail to work as intended or achieve the expected benefits that proponents hope for in the short term or the long term, which could also have an adverse effect on adoption of the Ethereum network and the value of ether, and therefore the Shares.
COMMENT 10 – RISK FACTORS
Please add a separately-captioned risk factor addressing the face that the Trust will not stake the ether it holds, so an investment in the Trust’s shares will not realize the economic benefits of staking.
RESPONSE TO COMMENT 10
The Registration Statement has been updated to include the following risk factor in accordance with the Staff’s comment:
The Trust will not directly or indirectly participate in any staking program, and accordingly the Shareholders will not receive any staking rewards or other income.
Neither the Trust, nor the Sponsor, nor the Custodian, nor any other person associated with the Trust will, directly or indirectly, engage in any action where any portion of the Trust’s ether is staked. The Trust’s inability to participate in staking will cause the Trust to not participate in any opportunity to receive additional ether, rewards or other income.
United States Securities and Exchange Commission
Division of Corporation Finance
June 21, 2024
Page
COMMENT 11 – IF A MALICIOUS ACTOR OR BOTNET OBTAINS CONTROL OF MORE THAN 50% OF THE VALIDATING STAKE
The Staff notes the disclosure that “it is believed that certain groups of coordinating or connected ether holders may together have more than 50% of outstanding ether, which if staked and if the users run validators, would permit them to exert authority over the validation of ether transactions.” Please add a separate risk factor to discuss the risks of centralization that liquid staking applications, such as Lido, may pose, including that Lido has reportedly controlled around or in excess of 33% of the total staked ether on the Ethereum network.
RESPONSE TO COMMENT 11
The Registration Statement has been updated to include the following risk factor in accordance with the Staff’s comment:
Centralization concerns around a single person or entity controlling a large percentage of the validating stake.
Validators must deposit 32 ether to activate a unique validator key pair that is used to sign block proposals and attestations on behalf of its stake (i.e., vote on its view of the chain). For every 32 ether deposit that is staked, a unique validator key pair is generated. An application built on the Ethereum network, or a single node operator, can manage many validator key pairs. For example, Lido, an application that provides a so-called “liquid staking” solution which permits holders of ether to deposit them with Lido, which stakes the ether while issuing the holder a transferrable token, is reported by some sources to have or have had up to 275,000 validator key pairs (each representing 32 staked ether) divided across over 30 node operators. At times, Lido has reportedly controlled around, or in excess of, 33% of the total staked ether on the Ethereum network. While it is widely believed that Lido has little incentive to attempt to interfere with transaction finality or block confirmations using its reported 33% stake, since doing so would likely cause its entire stake to be slashed and thus lost (assuming good actors unaffiliated with Lido controlled the remainder), and also because Lido is believed to not control most of the third party node operators where its ether is staked, and finally since the occurrence of such
United States Securities and Exchange Commission
Division of Corporation Finance
June 21, 2024
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manipulation of the Ethereum network’s consensus process by Lido or any other actor would likely cause ether to lose substantial value (which would hurt Lido economically), it nevertheless poses centralization concerns. If Lido, or a bad actor with a similar sized stake, were to attempt to interfere with transaction finality or block confirmations, it could negatively affect the use and adoption of the Ethereum network, the value of ether, and thus the value of the Shares.
COMMENT 12 – VALIDATORS MAY SUFFER LOSSES DUE TO STAKING, WHICH COULD MAKE THE ETHEREUM NETWORK LESS ATTRACTIVE
Please expand this risk factor to also address the risks associated with staking becoming less attractive to validators, including through the types of sanctions the Ethereum network may impose for validator misbehavior or inactivity.
RESPONSE TO COMMENT 12
The Registration Statement has been updated in accordance with the Staff’s comment.
COMMENT 13– A TEMPORARY OR PERMANENT “FORK” COULD ADVERSELY AFFECT THE VALUE OF THE SHARES
In the disclosure providing examples of the impact that hard forks have had on crypto assets, please include quantitative information regarding the price of the impacted crypto asset immediately before and after the fork.
RESPONSE TO COMMENT 13
The Registration Statement has been updated in accordance with the Staff’s comment.
COMMENT 14 – SHAREHOLDERS MAY BE ADVERSELY AFFECTED BY CREATION OR REDEMPTION ORDERS
Please expand this risk factor to describe what is deemed as an “emergency” such that the fulfillment of a creation or redemption is not reasonably practicable, and disclose the factors the Sponsor will consider to determine whether the suspension of creations and redemptions or the postponement of settlement dates are necessary for the protection of the Trust’s Shareholders.
United States Securities and Exchange Commission
Division of Corporation Finance
June 21, 2024
Page
RESPONSE TO COMMENT 14
The following disclosure has been added in the referenced section in accordance with the Staff’s comment:
When determining whether such an emergency exists, the Sponsor may consider, among other things, the overall impact such emergency has had on price, volume, volatility and liquidity in ether markets, the Sponsor’s view on the how long such emergency will persist, and the Sponsor’s view on whether such emergency is likely to ease or worsen. An emergency could include situations where the Trust is unable to transact in ether or where the Trust is unable to value its ether holdings, such as a circumstance where a digital asset trading platform experiences technical failure, power outage, network error or other circumstance resulting in a market-wide halt to trading, or the Trust is unable to access the ether in the Trust’s ether custody account at the Custodian due to technical or operating issues at the Trust or the Custodian. Such disruptions may have an effect on overall ether liquidity or cause price spreads of ether to widen, which may have a detrimental effect on the value of the Shares.
COMMENT 15 – ADDITIONAL INFORMATION ABOUT THE TRUST, TERMINATION OF THE TRUST
Please clarify whether shareholders will be entitled to cash or ether upon the termination of the Trust. In addition, if shareholders will be entitled to cash, please explain how the Trust’s ether will be sold in connection with the termination of the Trust.
RESPONSE TO COMMENT 15
The Registration Statement has been updated in accordance with the Staff’s comment.
C
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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 June 21, 2024 VIA EDGAR CORRESPONDENCE United States Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Re: Fidelity Ethereum Fund File No. 333-278249 Dear Mss. Paik and Berkheimer: This letter responds to your comments regarding Amendment No. 2 to the registration statement filed on Form S-1 for the Fidelity Ethereum Fund (the “Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”) on May 31, 2024 (the “Registration Statement”). Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statement. COMMENT 1 – GENERAL To the extent that the Trust intends to use a fact sheet, please provide the Staff with a copy for review. RESPONSE TO COMMENT 1 The Trust confirms that it does not currently intend to use a fact sheet. COMMENT 2 – COVER PAGE Please revise the cover page to state that the Trust will not participate in the proof-of-stake validation mechanism of the Ethereum network (i.e., the Trust will not “stake” its ether) to earn additional ether to seek other means of generating income from its ether holdings. RESPONSE TO COMMENT 2 The Registration Statement has been updated in accordance with the Staff’s comment. United States Securities and Exchange Commission Division of Corporation Finance June 21, 2024 Page 2 COMMENT 3 – PROSPECTUS SUMMARY Please revise the Prospectus Summary 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. RESPONSE TO COMMENT 3 The Registration Statement has been updated in accordance with the Staff’s comment. COMMENT 4 – PROSPECTUS SUMMARY Please revise the Prospectus Summary to disclose, if true, that: • Disclose that the Trust may only conduct cash creations and redemptions and that it would need regulatory approval to commence in-kind creations and redemptions; • Clarify that the timing of in-kind regulatory approval is unknown and that there is no guarantee that the Exchange will receive in-kind regulatory approval; and • Disclose how the Trust will inform shareholders if the Exchange receives in-kind regulatory approval and if the Sponsor chooses to allow in-kind creations and redemptions. RESPONSE TO COMMENT 4 The following disclosure has been added under the caption “Prospectus Summary – Plan of Distribution” in accordance with the Staff’s comment: As of the date of this Prospectus, the Trust only creates and redeems Shares in exchange for cash. If the Trust were to create or redeem shares in exchange for ether, the Trust would first need to seek certain regulatory approvals, including an amendment to the Exchange’s listing rules and an amendment to the Trust’s registration statement of which this Prospectus forms a part. There United States Securities and Exchange Commission Division of Corporation Finance June 21, 2024 Page 3 can be no guarantee that the Trust will be successful in obtaining such regulatory approvals, and the timing of any such approvals is unknown. If the Trust is successful in obtaining the necessary regulatory approvals to allow for creations and redemptions in-kind, the Trust will notify Shareholders in a Prospectus supplement and/or a current report on Form 8-K or in its annual or quarterly reports. COMMENT 5 – PROSPECTUS SUMMARY The Staff notes the Trust’s references on pages 3 and 46 that “Shareholders may not receive the benefits of any forks or airdrops” and, on page 69, “Risk factors. – The inability to recognize the economic benefits of a “fork” or an “air drop” could adversely impact an investment in the Trust.” As the Staff is unable to locate those references, please revise to correct. In addition, please include Prospectus Summary disclosure to clarify, if true, that with respect to any fork, airdrop or similar event, the Sponsor will cause the Trust to irrevocably abandon the Incidental Rights or IR Virtual Currency and in the event the Trust seeks to change this position, an application would need to be filed with the SEC by the listing exchange seeking approval to amend its listing rules. RESPONSE TO COMMENT 5 The references on pages 3 and 46 noted in the Staff’s comment have been corrected to refer to the newly added risk factors “The inability to recognize the economic benefit of a “fork” or an “air drop” could adversely impact an investment in the Trust.” In addition, the following disclosure has been added to under the caption “Prospectus Summary – Summary of Risk Factors – Risks Associated with Investing in the Trust”: Shareholders of the Trust should not expect to receive the economic benefit of any “fork” of the Ethereum network or asset “air dropped” to holders of ether. Before the Trust claims any digital asset resulting from a fork in the Ethereum network (other than what the Sponsor determines to be ether) or any air drop, the Trust would need to seek and obtain certain regulatory approvals, including an amendment to the Trust’s registration statement of which this Prospectus is a part and approval of an application by the Exchange to amend its listing rules. If such approvals are not obtained, the Sponsor will cause the Trust to irrevocably abandon such digital asset. United States Securities and Exchange Commission Division of Corporation Finance June 21, 2024 Page 4 COMMENT 6 – THE TRUST’S SERVICE PROVIDERS, THE CUSTODIAN The Staff notes the Trust’s references to the Custodian Agreement here and in other contexts where there is discussion around the Trust’s ether custodian. The Custodian Agreement appears to be an agreement with the Cash Custodian. Please revise the disclosure to refer to the Custodial Services Agreement and update the discussion regarding the Cash Custodian accordingly. RESPONSE TO COMMENT 6 The Registration Statement has been updated in accordance with the Staff’s comment. COMMENT 7 – ETHER, ETHER MARKETS AND REGULATION OF ETHER Please revise to add a discussion of the spot ether markets and ether futures markets. RESPONSE TO COMMENT 7 The Registration Statement has been updated in accordance with the Staff’s comment. COMMENT 8 – SUMMARY OF AN ETHER TRANSACTION The Staff notes the Trust’s disclosure that a “validator must stake 32 ether to become a validator” and that “each 32 ether that is staked results in issuance of a validatory key pair.” Please expand the disclosure to clarify that staking more ether can increase the numerical chances that a given validator will be randomly selected. RESPONSE TO COMMENT 8 The Registration Statement has been updated in accordance with the Staff’s comment. COMMENT 9 – MODIFICATIONS TO THE ETHEREUM PROTOCOL Please expand the disclosure in this section to describe the planned fork called “Dencun” that the Ethereum network underwent on March 13, 2024. United States Securities and Exchange Commission Division of Corporation Finance June 21, 2024 Page 5 RESPONSE TO COMMENT 9 The following disclosure has been added in the referenced section in accordance with the Staff’s comment: On March 13, 2024, the Ethereum network underwent a planned fork called “Dencun” implementing a series of EIPs. EIP 4844, which some commentators perceive to be the most significant EIP within the Dencun series, is intended to improve the economics of Layer 2s by introducing a temporary storage solution, called Binary Large Objects (“blobs”), which is expected to reduce the cost of recording batched transactions on the Ethereum Network. Operators of Layer 2 blockchains now have a choice of using two types of data storage: as temporary blob space stored for 4096 epochs (approximately 18 days) or as permanent smart contract call data. Because the data is pruned from the Ethereum Network new service providers are likely to emerge which store the historical blob data beyond the pruning period. As expected, and immediately following the upgrade, some Layer 2s reported reduced gas fees when batching transactions to the Ethereum network which in turn lowered the transaction costs on the Layer 2. As with any change to software code, planned forks such as Dencun could introduce bugs, coding defects, unanticipated or undiscovered problems, flaws, security risks, problematic incentive structures, or otherwise fail to work as intended or achieve the expected benefits that proponents hope for in the short term or the long term, which could also have an adverse effect on adoption of the Ethereum network and the value of ether, and therefore the Shares. COMMENT 10 – RISK FACTORS Please add a separately-captioned risk factor addressing the face that the Trust will not stake the ether it holds, so an investment in the Trust’s shares will not realize the economic benefits of staking. RESPONSE TO COMMENT 10 The Registration Statement has been updated to include the following risk factor in accordance with the Staff’s comment: The Trust will not directly or indirectly participate in any staking program, and accordingly the Shareholders will not receive any staking rewards or other income. Neither the Trust, nor the Sponsor, nor the Custodian, nor any other person associated with the Trust will, directly or indirectly, engage in any action where any portion of the Trust’s ether is staked. The Trust’s inability to participate in staking will cause the Trust to not participate in any opportunity to receive additional ether, rewards or other income. United States Securities and Exchange Commission Division of Corporation Finance June 21, 2024 Page 6 COMMENT 11 – IF A MALICIOUS ACTOR OR BOTNET OBTAINS CONTROL OF MORE THAN 50% OF THE VALIDATING STAKE The Staff notes the disclosure that “it is believed that certain groups of coordinating or connected ether holders may together have more than 50% of outstanding ether, which if staked and if the users run validators, would permit them to exert authority over the validation of ether transactions.” Please add a separate risk factor to discuss the risks of centralization that liquid staking applications, such as Lido, may pose, including that Lido has reportedly controlled around or in excess of 33% of the total staked ether on the Ethereum network. RESPONSE TO COMMENT 11 The Registration Statement has been updated to include the following risk factor in accordance with the Staff’s comment: Centralization concerns around a single person or entity controlling a large percentage of the validating stake. Validators must deposit 32 ether to activate a unique validator key pair that is used to sign block proposals and attestations on behalf of its stake (i.e., vote on its view of the chain). For every 32 ether deposit that is staked, a unique validator key pair is generated. An application built on the Ethereum network, or a single node operator, can manage many validator key pairs. For example, Lido, an application that provides a so-called “liquid staking” solution which permits holders of ether to deposit them with Lido, which stakes the ether while issuing the holder a transferrable token, is reported by some sources to have or have had up to 275,000 validator key pairs (each representing 32 staked ether) divided across over 30 node operators. At times, Lido has reportedly controlled around, or in excess of, 33% of the total staked ether on the Ethereum network. While it is widely believed that Lido has little incentive to attempt to interfere with transaction finality or block confirmations using its reported 33% stake, since doing so would likely cause its entire stake to be slashed and thus lost (assuming good actors unaffiliated with Lido controlled the remainder), and also because Lido is believed to not control most of the third party node operators where its ether is staked, and finally since the occurrence of such United States Securities and Exchange Commission Division of Corporation Finance June 21, 2024 Page 7 manipulation of the Ethereum network’s consensus process by Lido or any other actor would likely cause ether to lose substantial value (which would hurt Lido economically), it nevertheless poses centralization concerns. If Lido, or a bad actor with a similar sized stake, were to attempt to interfere with transaction finality or block confirmations, it could negatively affect the use and adoption of the Ethereum network, the value of ether, and thus the value of the Shares. COMMENT 12 – VALIDATORS MAY SUFFER LOSSES DUE TO STAKING, WHICH COULD MAKE THE ETHEREUM NETWORK LESS ATTRACTIVE Please expand this risk factor to also address the risks associated with staking becoming less attractive to validators, including through the types of sanctions the Ethereum network may impose for validator misbehavior or inactivity. RESPONSE TO COMMENT 12 The Registration Statement has been updated in accordance with the Staff’s comment. COMMENT 13– A TEMPORARY OR PERMANENT “FORK” COULD ADVERSELY AFFECT THE VALUE OF THE SHARES In the disclosure providing examples of the impact that hard forks have had on crypto assets, please include quantitative information regarding the price of the impacted crypto asset immediately before and after the fork. RESPONSE TO COMMENT 13 The Registration Statement has been updated in accordance with the Staff’s comment. COMMENT 14 – SHAREHOLDERS MAY BE ADVERSELY AFFECTED BY CREATION OR REDEMPTION ORDERS Please expand this risk factor to describe what is deemed as an “emergency” such that the fulfillment of a creation or redemption is not reasonably practicable, and disclose the factors the Sponsor will consider to determine whether the suspension of creations and redemptions or the postponement of settlement dates are necessary for the protection of the Trust’s Shareholders. United States Securities and Exchange Commission Division of Corporation Finance June 21, 2024 Page 8 RESPONSE TO COMMENT 14 The following disclosure has been added in the referenced section in accordance with the Staff’s comment: When determining whether such an emergency exists, the Sponsor may consider, among other things, the overall impact such emergency has had on price, volume, volatility and liquidity in ether markets, the Sponsor’s view on the how long such emergency will persist, and the Sponsor’s view on whether such emergency is likely to ease or worsen. An emergency could include situations where the Trust is unable to transact in ether or where the Trust is unable to value its ether holdings, such as a circumstance where a digital asset trading platform experiences technical failure, power outage, network error or other circumstance resulting in a market-wide halt to trading, or the Trust is unable to access the ether in the Trust’s ether custody account at the Custodian due to technical or operating issues at the Trust or the Custodian. Such disruptions may have an effect on overall ether liquidity or cause price spreads of ether to widen, which may have a detrimental effect on the value of the Shares. COMMENT 15 – ADDITIONAL INFORMATION ABOUT THE TRUST, TERMINATION OF THE TRUST Please clarify whether shareholders will be entitled to cash or ether upon the termination of the Trust. In addition, if shareholders will be entitled to cash, please explain how the Trust’s ether will be sold in connection with the termination of the Trust. RESPONSE TO COMMENT 15 The Registration Statement has been updated in accordance with the Staff’s comment. C