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Noted Katten Muchin lawyer helps Winklevoss twins with ETF plan for bitcoins

A Katten Muchin lawyer who helped create the first exchange-traded fund is behind a new proposal to create a similar investment product for bitcoins.

The Winklevoss twins, who own about 1 percent of the virtual currency, are advancing the plan, according to the New York Times DealBook blog and the Wall Street Journal (sub. req.). According to a filing for an initial public offering, about $20 million in shares would be sold to investors who hope to profit through a weighted average of bitcoin prices.

The filing is from Kathleen Moriarty of Katten Muchin, who has played a leading role in creation of the first exchange-traded fund, as well as the creation of gold- and silver-backed exchange-traded funds, the Times says. Still, it’s not clear the proposal will win Securities and Exchange Commission approval, the Times says. The newspaper spoke with several people who said the proposal was a long-shot effort for the twins known for their court battle with Facebook founder Mark Zuckerberg.

For now, bitcoins can be purchased or sold via informal computer networks and through online marketplaces “that require substantial technological savvy and are far more complicated than traditional exchanges,” the Times says. An exchange-traded fund would make investing easier.

The largest place to buy and sell bitcoins, Mt.Gox, has faced regulatory scrutiny along with other companies that allow for the buying and selling of virtual currencies. Mt.Gox had some of its U.S. accounts frozen before it registered with the Treasury Department’s Financial Crimes Enforcement Network, the Times says. Indeed, the Winklevoss filing warned of “an uncertain regulatory landscape” as well as other risk factors, including the presence of speculators.

Prior coverage:

ABA Journal: “Some basic rules for using ‘bitcoin’ as virtual money”

ABAJournal.com: “State accuses Bitcoin Foundation of being a money transferrer; group says it isn’t”

ABAJournal.com: “My clients can pay me in bitcoins, criminal defense lawyer says”