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Silbert told a group of journalists at his company's New York headquarters the fund, named the Bitcoin Investment Trust, has 90 investors, among them hedge fund traders and private family investment firms.
Using investor contributions and seed money of more than $2 million from SecondMarket, the BIT, as it is known, has been buying Bitcoins from a wide array of sources, including exchanges, merchants and individual users. The fund is also buying the digital currency from "miners," who are producing it by running programs that interact with Bitcoin's software to make new units of the currency.
The BIT is structured like an electronically traded fund and modeled, according to Silbert, after one of the most prominent gold ETFs, but it is not publicly traded and will not be for several more years. SecondMarket launched the fund at the end of September.
As the value of the floating currency, which is not governed by any central bank or company, increases, shares in the BIT will increase in value too.
The price of one unit of Bitcoin was listed at $920 on the website of Mt.Gox, a firm that buys and sells Bitcoin in exchange for dollars and other currencies. A month ago, on November 11, it was $361, according to Mt.Gox.
The most direct competition with Silbert's fund comes from Cameron and Tyler Winklevoss, the twin brothers famous for their legal battle with Mark Zuckerberg over the founding of Facebook. The two announced earlier this year they would launch a publicly traded ETF called Winklevoss Bitcoin Trust. They are awaiting approval from the U.S. Securities and Exchange Commission.
Silbert said he decided not to wait for SEC approval to launch SecondMarket's fund because it could take years. SecondMarket is known as a platform for selling and trading private investments.
In a statement to Reuters on Wednesday Cameron Winklevoss said: "We designed our product to allow all investors to be able to invest and believe that SEC review is an important part of the process.
"Trading on an exchange as a public vehicle removes friction and provides shareholders with liquidity and transparency," he added.
SecondMarket was one of the two most prominent places to trade shares of Facebook before the social media company's initial public offerings debuted. Silbert said early next year BIT investors will be able to begin trading in shares of the fund on a limited basis through a process similar to the pre-IPO Facebook trading.
JOBS ACT BOOST
Silbert said new SEC rules stemming from a 2012 law known as the JOBS Act, which lifted the ban on advertising by private investment companies, have helped draw new customers to the fund.
"We knew the JOBS Act was a big opportunity," Silbert said, adding the new advertising freedoms had allowed SecondMarket to start a website displaying the fund's performance and to describe the fund to a wider pool of potential investors. "It's been huge."
People whose personal wealth meets certain standards can now buy into the fund through three brokerages selling shares in it to customers with self-directed Individual Retirement Accounts. Fidelity last week became the latest brokerage to begin selling BIT shares, joining Pensco and Entrust.
To invest in the BIT, individuals have to prove their net worth is $1 million, not counting primary residence, or that they draw annual incomes of more than $200,000. The minimum buy-in amount is $25,000.
Critics have said the JOBS Act will expose more people with fragile finances to potential scams or simply to deals with a high likelihood of collapse.
Silbert said SecondMarket tries to determine whether potential investors can handle the risks of investing in the Bitcoin fund before describing the fund in detail to them.
"It's still a really risky investment," he said. "Bitcoin might still go away."
