The USA Securities and Exchange Commission has issued a cease-and-desist order to stop the unlawful activities of the Bitcoin Investment Trust and ordered its affiliate SecondMarket to return over $50,000.

The regulator’s claims are connected with the BIT’s redemption program implemented in 2014. The program attracted the attention of the SEC because the redemption took place during a continuous distribution of shares, which is a violation of law, namely of Rule 102 of Regulation M under the Securities Exchange Act of 1934.

Within this program, BIT’s authorise partner SecondMarket purchased 85,721 shares during the period from 2 April to 4 September 2014, thus earning $51,650.11. In September 2014, the SEC notified SecondMarket of potential violations of Regulation M, and the program was suspended.

Now, SecondMarket will have to return the $51,650.11 it has earned and pay prejudgment interest of $2,105.68.

Before starting the shareholder redemption program, the company sought and received legal advice from a third party and acted in accordance with its recommendations. The SEC has taken that into consideration and therefore does not demand any additional fees from BIT.

As the BIT’s press release reads, the company agrees to follow all the prescriptions of the regulator “without admitting or denying the findings.”

BIT was founded by SecondMarket CEO Barry Silbert while he was also CEO at Digital Currency Group. BIT shares are tied to the price of the fund’s assets in bitcoins. The company has been included in the list of the OTCQX platform which is considered to be the most reliable segment of over-the-counter trade. As a rule, companies on the OTCQX list are considered to be issuers that have gained the trust of investors.

Elena Platonova