Bitcoin ETF issuer VanEck to pay $1.75M to SEC over social sentiment ETF
BUZZ holds shares of Coinbase, Robinhood and MicroStrategy
Piotr Swat/Shutterstock modified by Blockworks
The Securities and Exchange Commission announced that VanEck will pay a $1.75 million civil penalty.
The investment management company, which also runs a spot bitcoin ETF under the ticker HODL, was charged with failing to disclose the role of a social media influencer for its Social Sentiment ETF (BUZZ).
The ETF was launched in 2021 and was backed by Barstool Sports founder Dave Portnoy. BUZZ aims to track stocks popular on social media.
It tracks 75 large-cap US stocks “which exhibit the highest degree of positive investor sentiment and bullish perception based on content aggregated from online sources including social media, news articles, blog posts and other alternative datasets,” according to the webpage.
Read more: Another bitcoin ETF just joined the $1B assets club. Will it be the last?
VanEck, according to the SEC, “failed to disclose the influencer’s planned involvement and the sliding scale fee structure to the ETF’s board in connection with its approval of the fund launch and of the management fee.”
The structure of the licensing fee “included a sliding scale linked to the size of the fund so, as the fund grew, the index provider would receive a greater percentage of the management fee the fund paid to VanEck Associates.”
VanEck declined to comment on the penalty.
While the fund isn’t focused on crypto stocks, it does have some exposure. According to the holdings page for BUZZ, the fund holds roughly 13,700 shares of Coinbase, making up 3.6% of the fund. It also owns shares of PayPal, MicroStrategy, Robinhood and Block.
VanEck was one of nearly a dozen firms to get the green light for its spot bitcoin ETF in January. It launched the fund alongside BlackRock and Ark 21Shares.
The firm, in a Thursday filing with the SEC, said that the sponsor fee for its spot bitcoin ETF would go to 20 basis points from 25 basis points starting Feb. 21.
Read more: Bitcoin ETF Tracker
The bitcoin ETFs, which saw a number of outflows at the beginning stemming from the conversion of Grayscale’s bitcoin trust to an ETF, have reported a pick-up in inflows this week.
Bloomberg Intelligence senior ETF analyst Eric Balchunas noted that the bitcoin ETFs comprised only 14% of the January ETF launches, but 83% of the assets under management (AUM).
The data, he added, “gives you an idea of how outlier freak-ish the [bitcoin] ETFs launch was.”
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