Bitcoin Forum

I'm curious if any legal experts here in the forum have an opinion on the legality of issuing Bitcoin securities on the GLBSE.

Activity is picking up over there since the GLBSE 2.0 release and some "real money" is starting to change hands, both in turnover and issuance, and the "deal calendar" seems to be heating up.

I'm in discussions with some others about hopping on the bandwagon and doing an issue of our own, but we're frankly a bit nervous about the legality and potential ramifications of doing an issue there, albeit virtual.

I am no securities lawyer, but I did work a number of years in the financial industry in both USA and UK as a registered representative, and I know that taking money from the public as an "investment" and offering "securities" in return is a highly regulated activity in pretty much every legal jurisdiction.

Now, I suppose that it can be argued that all these Bitcoins are just funny money, and these securities being issued in Bitcoins are just virtual and therefore don't count because they only exist in the cyberworld.  Any way you slice it, it's a bit of a grey area at the time being.  But whether or not this stuff violates the current letter of the law, it certainly appears to me to violate the spirit of the law.  Whether or not you consider Bitcoin a currency, or legal tender, or whether it has real value or not, consider this: if I went around offering unregistered investment securities to people, I think I'd eventually get locked up, irrespective of whether people paid me in U.S. dollars, Zimbabwean dollars, gold, or popsicle sticks!  The securities industry is right up there with the nuclear power industry in terms of sectors with the most government regulation, and I don't see how this stuff will avoid BigBrother's long arm for long.

I recently addressed these concerns with nefario (who runs the GLBSE) and he seemed to have a pretty relaxed attitude about it.  He said that while they try to avoid listing anything involved in obviously illegal activity, it is the responsibility of the issuer to determine the legality their securities issue in their own jurisdiction.  At this juncture, it's probably fair to say that none of the many existing GLBSE stock and bonds issues have been registered with the SEC, or sold with a prospectus (with the usual disclaimers), or paid the teams of investment bankers and securities lawyers the fancy coins necessary to get this done.  Running a securities exchange is also usually a highly regulated activity in the real world, but of course government regulation is basically nonexistent thus far in our virtual one.

This wonderful new technology, the invention of the distributed crypto currency, has opened the door to a number of activities that clearly straddle a grey area in our current legal systems, but in my opinion this business of issuing unregulated investment securities seems like the type of thing they'll bring the hammer down on, hard, sooner rather than later, exposing the issuers, investors, and/or exchange operators to significant legal risk ... especially if things go wrong.

Thoughts?

I couldn't agree more with all your concerns.  Reading thru some SEC guidelines here:

http://www.sec.gov/info/smallbus/qasbsec.htm#eod6 (http://www.sec.gov/info/smallbus/qasbsec.htm#eod6)

it appears that all of GLBSE's issuers are probably breaking some laws regarding unregistered securities if sold to US investors.  The specific securities may not technically have to be "registered", but they most certainly would need to provide offering statements.

I'm far from a securities lawyer, but I would agree that GLBSE will get some SEC attention at some point in the future.

the biggest problem is that glbse has at least 1 server in US. This was one of the most important legal argument for megaupload shutdown.
You can't exactly restrict US users, at most US tickers. But the server in US is a problem IMO.

edit: and .com could be a problem

If the USA dictates dotcoms, then it can be moved to a domain not controlled by the USA. QED.

IANAL, but it seems that anyone who lost any money on GLBSE has a valid claim against someone, probably GLBSE (they potentially could be considered as UK agents of all the offshore issuers of "securities"). I take it if you are located in UK and lost anything on GLBSE you can ask FSA to make you whole (at expense of GLBSE, most likely). I would guess it is pretty much the same in most jurisdictions.

here is some fun reading:

https://www.google.co.uk/search?q=financial+promotion+act
http://www.legislation.gov.uk/uksi/2001/1335/contents/made
http://www.salans.com/en-GB/Locations/~/media/Assets/Salans/Publications/2006/20060407-Making-financial-promotions-in-the-UK.ashx (just random comment on the relevant legislation, no affiliation)

P.S. Argument that Bitcoin is not money or that it has no value and therefore you can promote unlawfully or illegally assets denominated in BTC is just silly.


P.P.S.


P.P.P.S.

Silly Vladimir. Didn't you hear? Bitcoin is fake money (as long as the government is the one asking, otherwise it's real money tomorrow when someone important asks).

I've already asked Nefario for an I2P "eepSite" and a Tor ".onion" site and he was up for it.

.bit domain wolud be a secure minimum, but eepsite is definitely better. +1 for it!

may I recommend..

.ca!!

watching

In the USA, JOBS Act (http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups_Act) that relaxes these requirements significantly, both WRT investor requirements and in solicitations you may make.

IMNSHO, USA just legalized GLBSE on April 5, 2012.



Irrelevant.


No, the GLBSE securities are not "issued in bitcoin."  A security is a thing, a unique and independent legal entity.  That GLBSE makes it easy to buy and sell with bitcoins is incidental; GLBSE could just as easily use USD or EUR or gold or bananas.

If GLBSE tightens up its boilerplate and some requirements (i.e. investor limit), it is quite possible that an IPO on GLBSE could be a fully legal security in the US.


In general, even excluding securities law, GLBSE could create contracts between all market participants, where everyone has a click-through agreement (==contract) describing basic rules.

I don't think GLBSE is in violation of the law or at least not yet.

The determination if a security exists (and thus is subject to regulations of selling and promoting a security) is the Howey Test:

http://en.wikipedia.org/wiki/Securities_and_Exchange_Commission_v._W._J._Howey_Co.


Is Bitcoin money?  Has any US court given an opinion that Bitcoin IS money?

If the SEC was to try and indict the operators of GLBSE they would need to show that Bitcoin is money.  If it isn't money then it isn't a security.  For example in the game "Eve Online" corporations exist and they control assets sometimes massive amounts of assets who's market value is in the tens of thousands of dollars.  I doubt that SEC would find that those corporations would need to issue shares.  Any profits intended or realized aren't money.

On crowdfunding & the Jobs Act yes the law will loosen regulations.  The SEC hasn't written those regulations yet and almost certainly the regulations while "loose" compared to current regulations will still be "significant".  There will requirements related to KYC, AML, limits on funding, limits on number of investors, due diligence requirements on the exchange, surety bond requirements, licensing requirements, etc.

In other words driving down the cost of an IPO from tens of millions to tens of thousands.  I don't see that helping GLBSE or at least not until Bitcoin is significantly bigger.

I wonder if some of these listings, even though they are structured as "shares" of "assets", are no different than a normal contract between two parties.   Party A can contract with Party B to buy some GPU hardware and apply electricity where then party A receives the agreed upon net results of that activity as "dividends".

I too am not a lawyer and won't even speculate as to whether or not a regulator would or could do anything for someone who lost funds "investing" in an "asset" on GLBSE.  Following is a recent example of where the UK and the U.S. (SEC) went after fraud by an online business operating from the UK.  The SEC asserts jurisdiction because:


 - http://www.onwallstreet.com/news/stock-picking-SEC-2678481-1.html?zkPrintable=1&nopagination=1
 - http://www.sec.gov/litigation/complaints/2012/comp-pr2012-72.pdf (SEC complaint)

Of course, this was an easy case for the agency -- there was evidence of pump and dump fraud occurring, the fraudsters misrepresented what they were doing and didn't disclose their positions to their customers, they weren't licensed brokers, etc.  

Consider something like SATOSHISDAEMON "asset" on GLBSE.  If the horse doesn't perform well enough the "asset" share price will drop, potentially resulting in a complete loss of funds.  Offering this "investment vehicle" to the public might be in violation of securities regulations in certain jurisdictions.  But I doubt a complaint to the SEC in hopes of recouping losses would result in much of anything in response, nonetheless the agency going in to try and "disgorge" funds from anyone.

As far as being able to use the legal system for relief would, I suspect, make the words in the contract for the "asset" really important.  There is no such legal concept of having a share of a "project".  (Thank Kickstarter for spreading that type of thinking.)  So let's say a programmer has this idea, say to develop a bot that will do market arbitrage, and then creates an "asset" on GLBSE-- there doesn't seem to be anything the shareholder has a claim to.  Slavery is illegal, and illegal contracts are unenforceable using the law so a "shareholder" has no valid claim against the programmer's assets or income (including profits or revenues from any other projects the programmer might be involved in).

So the more important question probably isn't "Is it legal to IPO and be listed on GLBSE" the better question is, why would anyone be an investor in a "security" where there's nothing real that is owned?

I am so sick and tired of people being afraid of what might happen. Does anyone think that the inside traders that steal trillions care about getting caught? Bitcoin is an open ledger, so there is always at least some transparency. Regulators should be thanking Nefario for showing us the future of investment structures.

Looks like there are a few factors that make a huge bit of difference as far as what action, if any, a regulator might take.

For instance, where is the exchange?  With GLBSE, they've acknowledged a proxy server being located in the U.S..   Does that make it a domestic transaction if the investor is in the U.S.?   It might be arguable that a rational person would believe that this proxy meant that the transaction occurred within the U.S..

Another factor is is the location of the company ("asset", as GLBSE describes it)?

Perhaps a listing for a "company" that is located in the U.S. might be something that would concern a regulator whereas a listing for a GLBSE asset located outside the U.S. would not, regardless if a U.S. investor was defrauded.

And where is the investor from?  So apparently, foreign investors who buy shares in a U.S. company but make the share purchase outside the U.S. are not entitled to protection by the SEC, even if fraud had occurred (that's if I am understanding the Morrison decision correctly):

"Study on the Cross-Border Scope of the Private Right of Action Under Section 10(b) of the Securities Exchange Act of 1934"
 - www.sec.gov/news/.../929y-study-cross-border-private-rights.pdf
 - http://www.sec.gov/news/speech/2012/spch041112laa.htm

I deal with securities, have done a registered prospectus for a venture, and raised money from the "public".  Fortunately I am not in the US, but there are a number of interesting cross-border issues.  However, Bitcoins are still monopoly/play money as far as most jurisdictions are concerned.  You can't pay taxes with them, and acceptance is very limited.  At this stage, it is not illegal because it's more like an online game than a regulated activity.

I would like to provide a counter example - did you know that Neopets.com has a stock exchange?  (neopets.com was at one stage in the top five internet sites - no idea where it is now)  I had some interesting discussions with my daughter about portfolio tracking, day trading and risk when she was playing with it.  Yes, you can invest real money because people can sell neopoints.  Issuing securities to children (minors) in an unregulated exchange is far worse than GLBSE (that's mock horror by the way)

(I also notice via a google search that Second Life has a stock exchange)

Never heard of Neopets

Thinking about a GLBSE IPO. Will probably do it despite any fraudulent claim any government makes to control what I do with my work.

Speaking of 'any government', what claim does the SEC have over GLBSE? If a company registered in a friendly country goes through an IPO on GLBSE, which is not based in the U.S. either, why should they care? Scratch that. Policemen of the world and all that. Why should we care?

That means you were not aged 10 in 2004.

As at now, they have over 13,000 members online and 276 million pets - that stat is right next to their stock exchange index!

The Neopets stock exchange is nothing like a real stock exchange. The stocks are for fictional companies, and the prices fluctuate randomly according to certain probabilities per stock, without regard for actual supply and demand. It's just gambling.

IIRC Neopets has had some legal trouble involving anti-gambling laws, but it's against their ToS to buy/sell neopoints, so I guess it's legal.

Can you put a time reference on that?


Why should we care, today, when all GLBSE's assets combined have a market cap of under a quarter million USD (wild assed guess, no clue on the true number) or

Why should we care in May 2013, let's say, when all GLBSE's asset market caps combined hit the $10 million threshold?

The exchange might be identical a year from now with what it is today, but latter of the two may make all the difference as far as why should we care.

Is that where Zhoutong got his idea?

Thanks for that - something I didn't know (ref the legal issues).  It's odd about the gambling comment - there were many gambling games.  However, I do know people traded points against the tos.

The point I was attempting to make was that even if it wasn't an exchange that responded to supply and demand or real companies, it existed.  Someone issued a security and people could put their money into them.

What I'm becoming more curious about is how an asset can operate once it gets bigger than a solo operation.

So for instance, let's say the asset grows and needs to hire help (and pay the non-bitcoiner a salary).  Let's say this employee works in the U.S. in the same state that the asset issuer's founder is in.

Would the operator be risking penalties from the state for not withholding social security taxes?  Even if the asset wanted to do the withholding, how could it be done?  You can't get an EIN for a "project".

Does an asset need to incorporate once it grows any bigger than being a solo operation or at least before it can hire any non-contract employees?

Possibly related, a post:

Judge.me - Transnational Law (or Small Claims Court for the Internet)
 - http://bitcointalk.org/index.php?topic=83981.0

How is that relevant?

If the owner were clever he'd incorporate in the US state and form a different corporation in another country. Then instead of the domestic corporation hiring the employees it would outsource the work to the foreign corporation, which would hire the US employees as contractors and pay them using Bitcoin. It would then be up to the contractors to take care of their tax liabilities themselves.

sub.

http://empireavenue.com/

and

http://www.hsx.com/

I see both of them use their own virtual currency and dont handle actual fiat. I think glbse will be ok as long as it doesnt do anything silly like get a  bank account and allow direct transfer of fiat to buy assets.

Untill you can pay tax in bitcoin then I am fairly sure it is not considered money by the government, if so which country issues it ?????

We could buy an island somewhere then use wave power for the DC lol

Does anyone know anything about this?


 - http://gigaom.com/2008/06/17/vermont-oks-the-creation-of-virtual-corporations/


The Icelandic Modern Media Initiative is a proposal that was passed by their legislature.


 - http://blog.p2pfoundation.net/icelandic-modern-media-initiative-press-release/2010/06/21



 - http://en.wikipedia.org/wiki/Virtual_limited_liability_companies

We should see about moving the glbse server to iceland. Ive been reading about them opening large data centres there because the power is so cheap.

Are the companies listed on the GLBSE public companies? Seems like some of these "companies" aren't even incorporated. I smell illegality in all corners I'm afraid.

You do not need incorporation to be a legal entity.  There is a lot of ignorance about companies, company formation and entities.  For a lot of what appears on GLBSE an unincorporated joint venture is a good vehicle.

As an aside, have you bothered to check the legality of Apple, WellsFargo or any other "company" you've done business with lately (eg - your local food mart)?

But in no jurisdictions yet is there a legal entity for a "project".  Kickstarter has projects, but no equity so the funds to the project on Kickstart are not "investments" but instead are donations (or pre-sales, in most instances).

So currently these "shares" sold on GBLSE have no legal claim against the profits from the project nor would they have any claim against any assets purchased from either those profits or from the proceeds of the IPO.

Think of "investments" in any of the current GLBSE assets as gentleman's agreements backed by reputation.  (Well, I've seen loans and bonds listed as assets, so maybe those would be the exception where it is a legal contract which could be enforced through the legal system.)

There's no reason a GLBSE asset couldn't truly be a chartered corporation or LLC though (except for how offering equity to the public in this manner is something that is illegal in certain jurisdictions).  There might be tax havens like Anguilla or Cyprus that don't have restrictions against offering equity to the public (unaccredited investors).   Iceland is looking at the concept of a VLLC which presumably would be owned by shareholders.

The reason this entity definition might be relevant has to do with the ability to claim capital gains instead of having to declare proceeds from selling shares as regular income.  Listing an asset on GLBSE as a corporation or LLC entity would probably satisfy the definition of being an equity, and thus long term investment gains would enjoy the benefit of a lower tax rate as being capital gains.  Additionally, with a corporation or LLC there is civil and crimiinal code that limits actions the issuer might consider.

um, well, it depends on the arrangements (and I would be better answering this tomorrow).

For some of the projects I'm involved with there is a formal document and agreement, for others, it is, as you say, a "gentleman's agreement".  Not normally a donation, but a recognition of contribution.

I agree the listed entities could be an LLC, and then there is a distinction between a company raising funds versus simply adding liquidity for existing shares.

Part of my interest in this is my having done several different entities, and being a qualified chartered secretary - so it's a bit of fun watching the evolution of this.

I agree, it is fascinating seeing the capital formation in the BitCoin economy begin to take shape with this thriving bond market.

Does the sec regulate contracts between two parties or multiple parties ?

I dont know of any actual incorporated companies or LLC's  in the regular sense that use glbse.

What is the difference between a guy running a mining "company" and Mt Gox which is an actual corporation registered with the government ?

Mt. Gox isn't soliciting investment nor offering equity to non-accredited investors.

IIUC, the very basics of contract law require only agreement between legally recognized entities: a natural person, or an incorporated entity (corp, partnership, etc.)

It is doubtful that an anonymous, undefined entity ("internet nickname 'foo'" or "IP address 10.20.30.40") would be found to be a valid entity under contract law, but I would love to hear the opinion of an attorney.

For what it's worth, a partnership is not an incorporated entity. Perhaps you are thinking of a limited liability partnership (LLP).

http://www.bankrate.com/financing/banking/can-facebook-compete-with-banks/  I wonder if you could create a facebook share market game ?

So here's an example of a situation relevant to this conversation:

BTCSYN reports a $12k (1,852 BTC) theft
 - http://bitcointalk.org/index.php?topic=92142.0

BTCSYN is a GLBSE asset, with multiple people (from Canada) listed as being the asset issuer.

So the "CEO" had $12K USD of [the "company"'s] funds on Mt. Gox, didn't have two-factor authentication enabled, and the funds got stolen.

A day or so later, shares were dumped on the exchange and currently GLBSE has halted trades for the asset.

And now, there are pissed off "investors".

If BTCSYN was an LLC or corporation and suffered this loss, it might consider liquidating, and returning whatever is left to the shareholders and that's that  (except, if there were some lawsuit for negligence, but that's a separate concern).

So here, you have multiple people that received money from the IPO.  If there were a "shareholder" suit filed, it would go after those named as the issuers.  I'm not a lawyer and have no idea how such a suit would be decided.  I'm not even asserting that the "shareholders" try to take this through the legal system -- the amounts are too small for an attorney to take this on contingency, and the "shareholders" are likely from many different jurisdictions.

There will be a day where the party (or parties, in this instance) that "issued" an asset on GLBSE finds themselves faced with a court case.

Ouch! Such an elementary mistake and shame on investors not doing their due diligence.

Its hard to know the truth in that case. Hard to prove whether the coins were stolen or simply withdrawn by the account owner. No way to tell really.

With a "company" on GLBSE being unincorporated, do those buying "shares" of the asset become partners then?

Partners are jointly and severally liable for debts, right?  So let's say I buy a share of a mining asset (not a bond, let's say, but described instead as owning a share of the mining operation), and the mining operator did a bad job with the electrical wiring, someone gets injured and sues successfully.   Am I now liable for that debt?  (I'm not talking limited up to the $5 that the share was worth, I'm referring to actually getting named in a suit having to defend myself as a partner in this mining operation.)

Is this one of the possible outcomes?

Not likely. There would probably need to be a partnership agreement formalizing the partnership, rights, duties, responsibilities, etc.

If anything the GLBSE issues are creating personal debts for the issuers which would be tied to the identity of the documents submitted. Of course, if there is identity theft then the victim would not be liable.

So in the absence of a formal agreement there wouldn't be a default classification for these?   This surely is something that has been seen. This wouldn't be the first time multiple people unknown to the entrepreneur have put money in towards a venture, without any formal legal structure being formed first.

Prescient:

This thread has taken some interesting twists and turns, but it seems we can now end this thread exactly where we probably should have seen coming from the very beginning:


Unfortunately I did not have the foresight to completely protect myself from these kinds of risks, and now, like many others around here, I will be suffering at least a short-term or probably permanent loss on our investments at GLBSE.

Those accusing Nefario in breach of "GLBSE bylaws" perhaps should also get familiar with this contract law concept http://en.wikipedia.org/wiki/Illegal_agreement

Not really relevant. The accusations were not made in the context of planning legal action, but in the context of determining community action.

IANAL, but I don't get the problem here. Nefario is not dealing with any country's legally defined currency. How is GLBSE any different than FB games or MMORPGs? It seems to me he is just being hassled by schmucks that don't like games without fairies and epeens. I don't see them shutting down Eve or WoW for all the scams they have. Sure, he may be indicted, but he may also be acquitted, amirite?

Because they're advertised as games, and the developers running them don't officially support full convertibility of the in-game credits  to and from fiat. Even then lawyers are looking into the extent to which securities laws and anti-money-laundering laws apply to virtual games, for instance "AML Magazine - Only in the Virtual World" http://www.amlmagazine.com.au/amlwr/_assets/main/lib90004/only%20in%20the%20virtual%20world_issue%2031_dec11.pdf

You know, you can break securities laws and anti-money-laundering laws by trading in commodities or other valuable items too. For instance it's been suspected that many of the sky-high prices seen in the international fine-art market, and the plethora of anonymous buyers, are actually due to the ability to store and transfer wealth through art, or even straight-up money laundering schemes.

No court is going to believe Bitcoins aren't valuable if them being valuable serves the purposes of a securities fraud investigation.

Most of the GLBSE businesses were worth at most a few thousand bucks. It isn't worth the time of anyone to prosecute anything. Boys-night-out poker games move more money than most GLBSE IPOs.  Money laundering? What money? Sorry, I don't believe this is a legitimate threat. We'll have to wait until Nefario tells us what is happening. In the meantime, the next generations of decentralized exchanges will evolve and that will be the end of threats from government bullies.

Well, you're absolutely right for the most part, and that's also why online MMORGs don't receive more attention. But keep in mind that people working in these bureaucracies want to show that they're relevant and on the cutting edge of whatever they do - going after new tech can be one way to do that. Also, this comes after Pirate's ponzi has collapsed, and the allegations about how much money was lost in that scam - half a million USD - are for an amount large enough to warrant an official investigation. There is another incentive too: testing the waters. Pirate involved enough money to make some sort of investigation worthwhile, and the people doing that investigation may very well figure it'd be worth going all the way to get some practice before an even bigger scam comes along. It'd also be quite conceivable to give the investigation to a new, junior, officer to both give them some experience, and evaluate their performance before something important comes along.

Heck, I once probably experienced this myself while waiting in the international departure lounge in a country for which I had citizenship for, waiting for a direct flight to a different country for which I also had citizenship for. I was stopped by two officers for what they said was a random customs interview. One officer looked to be in his 50's or 60's, and his name tag said something along the lines of "senior" or whatever, and the other one looked like he was 18 or so. I gave them both my passports and my ticket, obviously showing that neither country could prevent me from entering, and the younger officer proceeded to grill me for the next ten or fifteen minutes about my trip in the exact same way you get entering a country when they're not sure if they're going to let you in.

After that was over, I overheard the older officer discussing his interviewing technique with the younger one...

Found on the Internet:

^ relevant comment from D&T in another thread:

Except on Tuesdays... When it's dark, you can give up to... and then Spock gives you a Vulcan nerve pinch.
Boy do we need Bitcoin.

I wonder if the mining bonds and some mining-related assets would be not classified as securities.

 - http://cuttingedgecapital.com/diamonds-gold-and-capital-raising-how-to-fall-outside-the-securities-laws-in-california/


Isn't that what those "bonds" are?    Aren't those "shares" really just contracts to run electrons through computing hardware? 

If 50 people get together and buy a mining rig and never resell the shares its got nothing to do with the SEC because its a private entity at that point and theres actual hardware involved. I guess those 50 people could get together and buy a gold bar in the same way.

I feel a need to post today.  I don't know the history of FSA/UK...

The SEC has a broad authority to regulate any financial related contract in the US.  I was very specific, I did not mention currency, so don't confuse the two.  On it's own bitcoin is fine...it's when folks decided to use contracts that outline stocks, bonds, exchange of securities, dealing in securities, etc that things went wonky in bitcoin.  Banks, lending & deposits are usually covered by other regulators.  Agree or disagree with me, but I am not the one who is going to decide to call you in.  If you don't know, go ask a securities lawyer instead of asking the question here...

Anyone who thinks they are investing when they buy a "security" in the bitcoin world on an un-audit-able unlicensed exchange lacking the benefit of a co-op/third-party holder of the securities didn't pay attention to the history of the US financial regulations.  Do you know why exchanges are regulated?  Do you know why you can't directly interact with the exchange without a license?  Why brokers are licensed?  Do you know why FINRA is an insurance co-op & industry self-regulator?  Why do companies use auditors?  Why do companies pay to get their credit rated? (yea the credit part not perfect...but you get the point...there is a reason for all this)  Do you know why these firms have compliance officers?

FRAUD, and the rules to prevent it

Money makes fools of the greedy, and tempts the corrupt into thinking they are above the rules...

Even the US rules don't change fast enough to protect a dynamic system, and ever more interconnected system...someone always seems to outsmart the system and bring it down just a bit.  So, after the mess, the rules get changed...

I would say anyone who thinks that any of these things could be sold or issued to a US entity without following the rules is pretty much risking every single US real-world right he/she has - so don't do it in the US, and if you did don't come to the US or any place extradition to the US is possible.  Well, I hope that scared you, but realistically, this mess is too small to nab everyone.

There is a bigger picture here...1) the bitcoin economy is really very thin 2) without the rules Fraud the amount of will exist in vast vast numbers. 3) uninformed, uneducated CEO's can cause a good idea, to become an insolvent nightmare very fast 4) unlicensed, unregulated business will leave without a trace

I think the best analogy is an California gold rush...mining makes the money, and other people figure ways to part the gold from you.  You can disagree, but right now, the only other useful purpose is Intl Exchange...which is subject to rules and regulations, and can disappear at any time.  Maybe one day, other enterprises will replace mining...but that is to be determined.  Just keep this in mind, bitcoin is an ideal...it is not yet an economy, in some ways it's still looking for a purpose.  It's only wishful thinking to label a forum economy.

At a minimum, without AML/KYC info, you are subject to any US LEO's whim.  The rest is up to the SEC's final workout plan...(if any)

A sympathetic judge might agree.

504 means you don't have to provide a full prospectus/product disclosure statement if you meet the exemption requirements.  505 requires you to know the identity of your investors and determine whether or not they're accredited (you can't determine that without knowing their financial resources) and you are not allowed to advertise in order to attract investors.


Are you going to pay his legal fees for defending against the charges?  Are you happy for all funds held by GBLSE to be frozen pending the matter going to trial?  Are you going to visit him in prison or pay his fines if he's not acquitted.

Everyone around here is very brave when it's not their freedom on the line or when they're not the ones who'd have to pay the fines and be banned from operating another business.