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Author Topic: The reasons why Bitcoin securities can’t be regulated by the SEC  (Read 5625 times)
Stephen Gornick
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October 07, 2012, 03:22:09 AM
 #21

3 and this is the killer)  Crowd funding portals are prohibited from offering ANY trading.  Period.  With no exceptions.

The SEC hasn't finished their rulungs but the Crowdfunding ammendment restricts the selling of shares to any other unaccredited investor for one year after purchase.  The ammendment doesn't prohibit shares of equity in a crowdfunded venture from being sold back to the issuer or to an accredited investor.  What wasn't clear is if those shares can be re-sold again to unaccredited investors or not

I believe the general understanding is that there will be secondary markets, just that because of the 1-year lockup, they won't exist until 2014.  If I had to guess, I'ld think that the crowdfunding platforms will have one or more markets that they will allow their platform's collection of crowfunded ventures to be traded.  The crowdfunding platform itself wouldn't have any involvement in operating the market then.

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October 07, 2012, 06:17:21 AM
 #22

Who is in your counsel and what credentials do they hold?

Pretty much none of your business on the first score.

No kidding. I sure wouldn't want my real name or professional reputation associated with the nonsensical garbage presented as legal reasoning in the linked article.

You can get much better than that from a first-year law student at a bottom-tier law school. If you paid anything for that steaming pile of intellectually dishonest crap you should ask for your money back.

I don't think the author even read the district court opinion they cited - if they did, they should find a new line of work.
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October 07, 2012, 06:17:02 PM
 #23

Who is in your counsel and what credentials do they hold?

As Internet Lawyers and Internet Attorneys, Mircea Popescu Internet Law specializes in protecting small, medium and large businesses on internet law issues related to online defamation, copyright infringement, internet and online trademark infringement, software trade secret theft and other internet law issues. When you need a real internet lawyer, talk to us first then compare the rest. Chances are we have already represented a client like you on an issue like yours.

http://polimedia.us is a website operated by Mircea Popescu, PLC DBA Mircea Popescu Internet Law. If you have an internet law question, whether it involves website agreements, affiliate marketing, selling counterfeit unregisterd (and unexempted) online securities, online contract drafting or negotiation, copyright infringement, internet defamation of character, domain name disputes, hacking or unauthorized access, trade secret theft, trademark infringement or other issue arising on the world wide web, contact us today.

Founding Partner Mircea Popescu began practicing law yesterday when he wrote a blog post about the internet and has been specializing in internet law ever since! As an intellectual property lawyer who understands the internet, Mr. Mircea Popescu has been featured in articles and interviews ranging from his own blog to Bitcointalk.org. Mircea Popescu Internet Law is large enough to handle complex litigation against the largest law firms, but nimble enough to offer innovative approaches to solving legal issues.
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October 08, 2012, 12:59:00 AM
 #24

Who is in your counsel and what credentials do they hold?

Pretty much none of your business on the first score.

No kidding. I sure wouldn't want my real name or professional reputation associated with the nonsensical garbage presented as legal reasoning in the linked article.

You can get much better than that from a first-year law student at a bottom-tier law school. If you paid anything for that steaming pile of intellectually dishonest crap you should ask for your money back.

I don't think the author even read the district court opinion they cited - if they did, they should find a new line of work.

If you have anything substantial to say, it belongs in the comments section of the reference.

Who is in your counsel and what credentials do they hold?

As Internet Lawyers and Internet Attorneys, Mircea Popescu Internet Law specializes in protecting small, medium and large businesses on internet law issues related to online defamation, copyright infringement, internet and online trademark infringement, software trade secret theft and other internet law issues. When you need a real internet lawyer, talk to us first then compare the rest. Chances are we have already represented a client like you on an issue like yours.

http://polimedia.us is a website operated by Mircea Popescu, PLC DBA Mircea Popescu Internet Law. If you have an internet law question, whether it involves website agreements, affiliate marketing, selling counterfeit unregisterd (and unexempted) online securities, online contract drafting or negotiation, copyright infringement, internet defamation of character, domain name disputes, hacking or unauthorized access, trade secret theft, trademark infringement or other issue arising on the world wide web, contact us today.

Founding Partner Mircea Popescu began practicing law yesterday when he wrote a blog post about the internet and has been specializing in internet law ever since! As an intellectual property lawyer who understands the internet, Mr. Mircea Popescu has been featured in articles and interviews ranging from his own blog to Bitcointalk.org. Mircea Popescu Internet Law is large enough to handle complex litigation against the largest law firms, but nimble enough to offer innovative approaches to solving legal issues.

Oh I dunno, just some guy with a provable track record of suing the gov't and winning. Go cook some crow, smartypants.

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October 08, 2012, 01:48:00 AM
 #25

You werent talking about the Romanian backwoods 6 heads "government" you are talking about the SEC and a country that has a military that is larger than the next 10 combined. Untill you can show us where MP has taken on the SEC and/or the US Attorney General or the supreme court please gtfo. Also satoshidice is an unregulated security issued by a US citizen who is easy to find.

Not that I agree with what the SEC does but the outcome is inevitable. If you think Im bullshitting MP should fly to the US and see what happens  Tongue

You don't get to set any goalposts for Mr. P 'till at the very least you're done reimbursing the poor suckers that your company has defrauded.

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October 08, 2012, 01:49:39 AM
 #26

Hmm, came across "persons that operate or control electronic or other platforms to trade securities;"

at http://www.sec.gov/divisions/marketreg/bdguide.htm

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October 08, 2012, 04:08:52 AM
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Oh I dunno, just some guy with a provable track record of suing the gov't and winning. Go cook some crow, smartypants.

You're citing a single case involving Romanian immigration law as a "provable track record" relating to US securities law?  bwahahaha.

Quote
Founding Partner Mircea Popescu began practicing law yesterday when he wrote a blog post about the internet and has been specializing in internet law ever since!

Absolutely confidence inspiring.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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October 08, 2012, 07:14:55 AM
 #28

You werent talking about the Romanian backwoods 6 heads "government" you are talking about the SEC and a country that has a military that is larger than the next 10 combined. Untill you can show us where MP has taken on the SEC and/or the US Attorney General or the supreme court please gtfo. Also satoshidice is an unregulated security issued by a US citizen who is easy to find.

Not that I agree with what the SEC does but the outcome is inevitable. If you think Im bullshitting MP should fly to the US and see what happens  Tongue

You don't get to set any goalposts for Mr. P 'till at the very least you're done reimbursing the poor suckers that your company has defrauded.

What company ? I dunno what youre talking about  Kiss

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October 08, 2012, 12:43:54 PM
 #29

You werent talking about the Romanian backwoods 6 heads "government" you are talking about the SEC and a country that has a military that is larger than the next 10 combined. Untill you can show us where MP has taken on the SEC and/or the US Attorney General or the supreme court please gtfo. Also satoshidice is an unregulated security issued by a US citizen who is easy to find.

Not that I agree with what the SEC does but the outcome is inevitable. If you think Im bullshitting MP should fly to the US and see what happens  Tongue

You don't get to set any goalposts for Mr. P 'till at the very least you're done reimbursing the poor suckers that your company has defrauded.

What company ? I dunno what youre talking about  Kiss

Well, "company". Global Scam Exchange.

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October 08, 2012, 04:42:09 PM
 #30

You're citing a single case involving Romanian immigration law as a "provable track record" relating to US securities law?  bwahahaha.

Nope, grow a reading comprehension. You know, that thing where words have meanings and shit.

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October 08, 2012, 11:38:17 PM
 #31

I really and truly hope you're, right, MPOE.

But I would give 4-to-1 odds that the US justice system will disagree, and my advice to anybody thinking of raising funds via an unregulated IPO would be "don't do it unless you want to do it as a protest against our broken system and are willing to face the likely consequences."

I'll cheer you from the sidelines, but I'm either not stupid enough or not brave enough to go up against the SEC.

How often do you get the chance to work on a potentially world-changing project?
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October 09, 2012, 12:34:14 AM
 #32

I really and truly hope you're, right, MPOE.

But I would give 4-to-1 odds that the US justice system will disagree, and my advice to anybody thinking of raising funds via an unregulated IPO would be "don't do it unless you want to do it as a protest against our broken system and are willing to face the likely consequences."

I'll cheer you from the sidelines, but I'm either not stupid enough or not brave enough to go up against the SEC.


Can certainly appreciate that position.

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samson
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October 09, 2012, 02:39:39 PM
 #33

How about a TOR hidden service exchange.
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October 09, 2012, 08:35:23 PM
 #34

The promotion and advertising of securities through the means of interstate communication is a large part of what the SEC regulates in the U.S.

Establishing that a Bitcoin security is a pooled venture which is expected to generate profit by relying on the actions of a third party seems to be straightforward.  The only missing piece is an exhibit showing that Bitcoin exchanges for money. 

During discovery, the prosecution could just bring out BitInstant's FinREC registration as a money exchanger.  Or get expert witness testimony from MtGox.  Or both.  Everything else is already in place (profit motive and third party). Expecting a judge to advocate for Bitcoin at this point in the proceedings would probably be a strategic mistake.  The courts don't care how you dress it up.  Precedence in U.S. law makes that very clear.

After that, you are defending against wire fraud.  Which has nothing to do with what constitutes a security.

The funny part is that selling securities isn't illegal in the U.S.,  it's just highly regulated.  Form D gets you private share sales up to $1 million dollars without a full registration.  You just can't advertise or promote them.  And you have to declare and comply with every state law you declare as well.

IANAL.  But I find this discussion fascinating.


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October 09, 2012, 09:40:00 PM
 #35

While there are some interesting points in the article, there seem to be errors.

Though the 5th Circuit Court opinion you cited used the word "money" IMO, this word was used to mean Money - not Legal Tender Your argument suggests that you've equated the two terms. Historically, anything from grain, to gold, to banknotes, to fiat banknotes, and beyond has served as "money" Therefore, anything of value that one might invest might qualify under
Quote
1. Investment of Money towards a 2. Common Enterprise which 3. Depends on the Efforts of Others and likely remains in full force as the standard test for the matter pending further Supreme Court rulings.

true, IANAL, and don't have an extensive law library to search case law for the definition of "money" bit AFAICT, that is a very vague term, not necessarily defined legally, whereas there are much more explicit, well defined terms that could be used if the Court's desire was to limit the scope of the definition of money, and thus the scope of the opinion.

Furthermore,

Quote
III.3. While it is true that some people spend money or other capital to acquire such in-game currency, it is not true that :

a) Any authority exists which could issue Bitcoins, promise to issue Bitcoins, or make any representations as to Bitcoins whatsoever ;
b) Any state, government or organisation issues Bitcoins or could conceivably issue Bitcoins either as legal tender, for the payment of taxable income, as a currency of account or to be used in local or international trade.
Because of these reasons it can not be said that anyone holds any title in either law or equity to any Bitcoin. Since there is no first owner of the Bitcoin that could then pass title as part of a contract, all purported Bitcoin “purchases” are contracts for no consideration and as such legally without merit.

A contract (in the US) is considered valid if there is an offer, acceptance of the offer, and consideration paid for the offer. There is no requirement in the UCC for that consideration to be made in "money" - just value transferred in consideration for the offer. It, therefore, only need be established that bitcoin has value in order for it to be accepted as consideration for an offer.

That you make the above argument, that a contract with consideration paid in bitcoin is invalid, because bitcoin doesn't qualify as consideration is problematic. It would seem that MPEx has made offers, and accepted bitcoin as payment of consideration by the acceptor(s) of those offers. This cannot go both ways. Either the contracts you've presented are invalid, or a contract with consideration paid in bitcoin is valid. IMO, I'd rather your argument break down here than your contracts Smiley 

So, while bitcoin may not actually "care" about the SEC, and may be able to be used to circumvent legal restrictions in any jurisdiction, primarily by obfuscating issuer identities, that doesn't actually mean that the SEC is outside of its (self proclaimed) jurisdiction of "all companies that serve US citizens and deal in or with securities of any sort".

The one part of the argument which may have some merit is the establishment of "ownership" or "legal title to" a/some bitcoin. If one could establish that no one can own, or posess, or have title to, an amount of bitcoin, then it could indeed fail the test for valid consideration payment. However, I believe that one can establish that one has irrefutable control over, and therefore, what is tantamount to ownership of, bitcoin.

It remains to be tested whether or not the ability to sign a message with an address, or to send a specified payment to a specified address is enough to establish "ownership" or "title" or and other sort of legal control that may be necessary for it to be valid consideration paid for an offer made.

But, I'll have to go back to - The Offeror requested consideration in bitcoin, the Acceptor paid consideration in bitcoin, and the bitcoin paid as consideration was accepted, and the goods or services were delivered by the Offeror. After the goods are delivered, unless there is some  move made by the Acceptor to forcibly withdraw the consideration, and the Offeror has accepted, and redeemed in some way, the consideration - the contract is in force. The longer that the Offeror fails to seek remedy after the goods or services are delivered, the more the validity of the consideration is established.

If bitcoin were to be found to be "illegal" itself - then there might be another argument to invalidate any contract based on it as consideration - provisions in contracts that are illegal are generally not upheld in court - if that is the consideration itself, it would stand to reason the contract would be null and void. (if I replace "bitcoin" with "heroin" the contract will not be enforced by any court in the US Wink )

But, all in all.....BTC doesn't care about the SEC. MPEx rules.

It's my opinion that the failures on Wall St. over the last several years have shown that business has grown beyond the government's ability to regulate (ah, here, it certainly is mostly the other way 'round...business regulates government) In the cases where the government fails in its sworn duty to protect its citizens, then the citizens must protect themselves. You may laugh, especially given the GLBSE and other securities scandals in bitcoin, but, it takes time for people to learn, and for the needs to be assessed, and tools developed to support that need for the people to protect themselves.

MPEx currently is the some of best protection we have from overzealous governments who would quash innovation like bitcoin, and more specifically, utilizing the Bitcoin network and bitcoin derived technologies to improve things like transparency in public financial reporting, and reduce opportunities for fraud. Again, with as much fraud as we've seen, this may seem laughable now, but as I look through proposals like this, on decentralized bond markets I'm encouraged that in the long term, we can achieve those goals.

With as much fraud, and crime as we've seen on Wall St, I'm quite sure we need to achieve those goals.

One last thing. While I might pass the test for "sophisticated investor" - I'm sure as hell not going to pass most of the "accredited investor" tests necessary to invest in certain kinds of instruments. This is one of my primary reasons for investing via bitcoin instead of vi USD in traditional markets. With small sums of money, there are extremely limited opportunities in the traditional marketplace. I don't think that it's the governments job to protect me so much that I am unable to participate in the market, and unable to earn. I've had some pretty significant (to me) losses, due to negligence, fraud, and outright theft, but these were risks I clearly understood, and accepted. I invested no more than I can afford to lose. Even with my losses, I've done better than I could with a job in the small town I live in, and that, IMO, is not something the government should be in the business of stopping....there are no jobs in the small town I live in, and that's a significant problem for the government.

So. For all you government employees reading this: take that back to the bosses. Bitcoin is young, and a few scandals like these recent one will necessitate improved processes that protect investors much more than any law will ever be able to - becoming overly involved will crush that innovation, which will, in the end, greatly assist you (if you're still needed, and if you're not needed, provide you new, more exciting and lucrative opportunities!)  [/rant]

To wit:   Distributed Bonds, Colored Coins, Atomic Coin Swapping, Contracts, SmartProperty, and Software Agents] - This would literally diminish the potential scope of any regulatory body. Though one could attempt to police & prosecute human actors in this model, it wouldn't be possible to prevent issuance or exchange of securities, of really any sort.

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October 09, 2012, 10:51:10 PM
 #36

The one part of the argument which may have some merit is the establishment of "ownership" or "legal title to" a/some bitcoin. If one could establish that no one can own, or posess, or have title to, an amount of bitcoin, then it could indeed fail the test for valid consideration payment. However, I believe that one can establish that one has irrefutable control over, and therefore, what is tantamount to ownership of, bitcoin.

It remains to be tested whether or not the ability to sign a message with an address, or to send a specified payment to a specified address is enough to establish "ownership" or "title" or and other sort of legal control that may be necessary for it to be valid consideration paid for an offer made.

This is key, I think.  The courts have no problem dealing with abstract intangible things.  But bitcoin is a whole new meta-level of abstraction and intangibility.  Bitcoins don't exist in the real world like paper dollars, but they also don't exist electronically, like abstract bank account dollars.

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October 09, 2012, 11:40:02 PM
Last edit: October 10, 2012, 12:12:06 AM by galambo
 #37


Quote
Founding Partner Mircea Popescu began practicing law yesterday when he wrote a blog post about the internet and has been specializing in internet law ever since!

Absolutely confidence inspiring.

I see the beginnings of a remake...

A plucky, middle aged man of indeterminable foreign origin opens a fictional stock exchange. Follow him on this raucous adventure as he gets busted by the State's Attorney. He can't afford the $50,000 for his own attorney so he decides to go at it "Pro Se." Will his hail mary "It's all just a MMO" specious defense keep him out of the slammer or will he be doing hard time? Find out in
 
My Cousin Mircea
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October 16, 2012, 12:44:01 PM
 #38

I wish the government would just leave this system alone.

Bitcoin will be either shut-down or it will be overtaken and used as long ago announced one world currency. There's no other outcome, IMO.

Bitcoin already is the only world currency. "Overtaken" hmm, depends what you mean. If you mean the rich, influential and important will oust the 12yos with delusions of grandeur, then absolutely.

Guruvan: Posting these comments on the blog could actually get you a reply. I'm not qualified to discuss the matter.


Quote
Founding Partner Mircea Popescu began practicing law yesterday when he wrote a blog post about the internet and has been specializing in internet law ever since!

Absolutely confidence inspiring.

I see the beginnings of a remake...

A plucky, middle aged man of indeterminable foreign origin opens a fictional stock exchange. Follow him on this raucous adventure as he gets busted by the State's Attorney. He can't afford the $50,000 for his own attorney so he decides to go at it "Pro Se." Will his hail mary "It's all just a MMO" specious defense keep him out of the slammer or will he be doing hard time? Find out in
 
My Cousin Mircea

Read more, opine less. You can start with the actual link (for instance, it includes a picture).

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March 19, 2013, 03:55:24 AM
 #39

Hey, guess what! MP was actually right.

Strategic superiority, a saga.

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March 19, 2013, 04:21:45 AM
 #40

Hey, guess what! MP was actually right.

Strategic superiority, a saga.

So what's the legal interpretation of this?

Quote
a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

What are the implications of being an exchanger and money transmitter?
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