Subject: File No. SR-BatsBZX-2016-30
From: anonymous anonymous

November 21, 2016

I read the comments posted by others and felt obliged to submit my own comment so the SEC can better understand that they are dealing with dangerous people.

I am a former user of the Gemini Exchange and want to point out how the Winklevoss brothers have victimized the users of Gemini. Last year in November customer orders were entered and filled at prices over $2000 which was above market of $330+. Gemini chose to cancel and reverse the trades and did not honor them. As a consequence I incurred losses and have never been compensated.

I hope the SEC will prevent others from falling victim to the rich and powerful. The purpose of my letter is I want to make sure the SEC sees Gemini and the proposal by the Winklevoss brothers for what they really are. I have spent time reading the documents for the Winklevoss ETF and would like to provide comments about specific areas and quotes in the documents.

Im not sure what the proposal means by accurate price of bitcoin on Gemini but of all the exchanges Gemini has the worst pricing. Prices can be found at, and, and Gemini trades at a discount to other exchanges. Gemini also has the lowest volume.

The Gemini auction could be an improvement but it has not improved volume. The auction prices can be found on Gemini claims it is a top three US exchange. Who are they trying to fool? There are only three exchanges in the United States. Gemini has the lowest liquidity of the three and is one of the least liquid exchanges of all exchanges that trade bitcoin for US dollars.

As you can see from the auction data, traders in the auction are taking advantage of the discounted auction price. I know the Winklevoss say they specifically designed its daily two-sided auction process to maximize price discovery and reduce price volatility that could be the result of momentum pricing, but I dont understand what they mean because they have not explained what has been put in place for this.

I am concerned about using Gemini because anyone who trades bitcoin can manipulate trading on Gemini because it has no volume. Even the Winklevoss know this is true because they say in their document that momentum pricing of bitcoin has resulted, and may continue to result, in speculation regarding future appreciation in the value of bitcoin, inflating the price of bitcoin and making it more volatile. As a result, bitcoin may be more likely to fluctuate in value due to changing investor confidence in future appreciation in the Gemini Exchange Auction Price, which could adversely affect an investment in the Shares. If Gemini prices are used for the ETF it will be a problem.

Other financial products sometimes have auctions to determine price, but an auction on a stock exchange does not require sending money to the exchange to be in the auction. Gemini requires dollars or bitcoin to be deposited before you can participate. This is a problem because the auction on Gemini is limited and warped.

On at least two occasions, the auction on Gemini actually failed.

In addition to Gemini price issues, another issue is what would happen if Gemini goes out over the short term or permanent. Exchanges have been hacked in the past and Gemini itself had trading issues in the past. Gemini has not explained a solution to this problem. I believe that the people who wrote the documents that were filed for the ETF do not understand bitcoin trading.

Another interesting fact is that Gemini also trades ethereum units and traders can trade bitcoin for ether. How will the ether trading effect Geminis bitcoin prices and trading and the fund?

There are serious conflicts of interest between the ETF and Gemini. Here is an example: Blackrock is one of the biggest ETF issuers in the world, but they dont own the New York Stock Exchange. I would expect that if Blackrock wanted to buy the New York Stock Exchange, regulators would block the deal. The regulators would know that Blackrock shouldnt be able to double-dip on fees by getting trading fees from owning the stock exchange and also management fees from its ETFs. The Winklevoss ownership of both Gemini and the Bitcoin ETF is exactly the same idea, and it lets the Winklevoss double dip. It is a major conflict of interest.

The conflict was written about in an article on by Christopher Langner. He said that the Bitcoin ETF is likely to be a major revenue generator for Gemini. A2013 studyshowed that for mutual funds, transaction costs can be equivalent to the expense ratio and could knock out as much as 3 percentage points of performance. In other words, the cost of buying and selling the securities can exceed the fund managers fee -- and for an ETF, by several times more. So even if an ETFmanager isnt making much money, the broker is. Thats the beauty of the system the Bitcoin ETF plans to adopt. To ensure the safety of their holdings, the managers may use a single exchange -- effectively a digital currency broker -- that happens to be owned by the managers.Its often said that the people who made the most money in the U.S. gold rush of the 19th Century were sellers of picks and axes. Now that fees for managing money are being compressed, just make them up in trading. The issue is very clear.

The conflict goes further than just fees. The Winklevoss say the Trust will enter into an information sharing agreement with the Gemini Exchange enabling it to obtain and publish the Gemini Exchange Auction Price on the Trusts website. In addition, the Sponsor will arrange for the Gemini Exchange to share data regarding the Gemini Exchange Auction Price and other trading data with the Exchange. I have reviewed the ETF documents and do not see any information that will be shared or how Gemini will make sure the information is not used improperly. For example the Winklevoss see the order book and all bids in the auction. That is unfair to everyone.

And the Winklevoss have said that no affiliate of the Sponsor is an Authorized Participant, it is possible that an affiliate of the Sponsor could enter into transactions to purchase from or sell or lend bitcoin to an Authorized Participant. Any such transactions would occur at the current market price of bitcoin in the Bitcoin Exchange Market and may result in realization of significant gains to the affiliate. Any connection between market players and Gemini is an issue because small investors like me will get the short end of the stick.

The Winklevoss own 1% of all bitcoin outstanding. They have said so on more than one occasion. The ETF will be a liquidation event for them so that investors will buy the bitcoins that will be unloaded by the Winklevoss brothers in the initial public offering of the ETF. I hope the SEC knows about this issue because I have not found anything in the documents online. Isnt this just like an insider unloading a ton of stock in an IPO? Doesnt it need to be disclosed somewhere?

I am concerned about the Winklevoss running the ETF. They have been unable to run Gemini and will be unable to run the ETF and investors like me will get hurt as I was with my past experience trading on Gemini.

Thank you for your courtesy.