The pair whose claims that Mark Zuckerberg stole the idea for Facebook from them became the subject of the film The Social Network, are trying to reinvent themselves as entrepreneurs in an emerging Bitcoin economy.
The pair have set up Math-Based Asset Services LLC – a name that makes reference to the currency’s cryptographical origins – which will manage a Bitcoin portfolio and give shareholders exposure to the yo-yoing price of the currency.
If the project is given a green light by the Securities and Exchange Commission, the regulator, and by an exchange, they will contribute their holdings of Bitcoin into the trust, in return for shares.
The plan does not mean the pair are giving up on the currency, which supporters believe could revolutionise payments if it becomes widely used. Bitcoin was created four years ago by an anonymous web developer. Transactions are stored across an international network of computers, putting it outside the purview of governments and traditional banks.
“We have not sold our Bitcoins and we don’t plan on selling them anytime soon,” Tyler Winklevoss said, though he declined to set a time limit on that commitment. “We are very confident in Bitcoin and believe that digital math-based assets are here to stay.”
The proposal for an ETP was launched in a regulatory filing with the SEC late on Monday. Many financial details remain to be filled in, the trust that will hold the portfolio has not been set up and there is no guarantee that an exchange will take the product.
But Cameron Winklevoss insisted upon the seriousness of the plan. He pointed to the use of law firm Katten Muchin Rosenman, whose partners have been involved in the launch of other exchange-traded products including those that track gold and silver.
“Preparing the registration statement required significant time and financial commitment. We retained a law firm that has launched innovative products before; this is not their first rodeo.”
Bitcoin start-ups are attracting real venture capital money, but the currency itself is still the purview of speculators. Its price has swung between $14 and $266 this year and sits around $90 now. The Winklevoss twins say they own about 1 per cent of the total stock, which is currently valued at $1bn.
Jim Angel, professor of finance at Georgetown University, said the SEC should require that the twins disclose their holdings among the risks cited in the prospectus. “Any significant selling by them could have a significant market effect.”
The twins were keynote speakers at the Bitcoin Foundation’s inaugural annual conference in California in May, when they predicted the currency’s development would follow the quotation attributed to Mahatma Gandhi: “First they ignore you, then they ridicule you, then they fight you, and then you win.”
Bitcoin itself is moving into stage three. The fate of Math-Based Asset Services will determine if the Winklevii ever get beyond stage two.