The Legal Brainstorm

[pwnrman]

I started an Investment Club here: https://bitcointalk.org/index.php?topic=116819

Our discussions have slowly drawn toward legality, and I decided it was time for a redirect to a new 'legal' thread.

We have thrown several ideas on the table including

-Group Funds
-Investment Clubs
-Church

And More...

[1715409330]

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[drekk]

I'm considering writing an exposé on The First Church of Satoshi (Bitcoin sounds too technical). We would be sharing (= trading) HappyPoints with each other or form groups to make people with special ideas/projects SuperHappy. Not sure how to fit in Cthulhu, though.

SCNR; point already made in other thread.

Cheers!
  ~drekk~

[pwnrman]

I'm considering writing an exposé on The First Church of Satoshi (Bitcoin sounds too technical). We would be sharing (= trading) HappyPoints with each other or form groups to make people with special ideas/projects SuperHappy. Not sure how to fit in Cthulhu, though.

SCNR; point already made in other thread.

Cheers!
  ~drekk~

+1

[dentldir]

IANAL, but here's a summary of what I've learned watching the GLBSE situation:

Crowdfunding is not legal in the U.S. yet.  The JOBS Act was passed in April of 2012 but the SEC was given 270 days to rule on the actual mechanisms of enforcing the law.  They have dragged their feet.  In August, they came out with a ruling about Title II, but that only affects crowdfunding for accredited investors.  It only lifted the public advertising restrictions to accredited investors.  Title III affects the general public rights.  They have said nothing and probably wont well into next year.

Also, all crowdfunding will go through SEC cleared broker/dealers or designated crowdfunding portals.  You can't just start your own exchange and start crowdfunding anymore than you can run a bank out of your garage.

So current law still applies.  If this forum is considered a public place, and you advertise the sale of shares of a security (which only needs to pass the Howey test to qualify), then you are under the SEC jurisdiction in the US.

If its a private business, then you can raise up to $1 million by selling shares and only need to file a Form D with the SEC.  See a lawyer for all the details.

No matter which path you take, none of these securities can be trade for 2 years or so after they are purchased.  (Someone with more knowledge please correct me).

In the UK, the FSA has the authority over the sale of securities.  In general, if the collecting of funds is a donation, then you are in the clear.  If there is any kind of return of money to the investors, then the FSA has authority.  One unique exception to this rule is if the "securities" are clearly labelled "bets".  I have no idea how that holds up, see a barrister for all the details.

It would seem that "IPO, shares, dividends, etc" is the wrong language all together since it also implies incorporation and other regulations.  These mining contracts are private contracts between individuals.  You are selling computational time to a private citizen.  You probably still want to follow the basics of contract law which lawyers will be more than happy to take your money for.

[pwnrman]

@dentldir have you read up on Investment Clubs at all.?

[dentldir]

@dentldir have you read up on Investment Clubs at all.?

Just a little.  My understanding is that you can form an investment club as long as its people you know and don't seek outside money.  (So no advertising the club, no website chat about them). I don't think you need to register them either, but they do get separate tax treatment.  I also believe if the club offers "interests" in the club, then they might be considered an investment company under the 1940 act.

Each state applies its own laws to these clubs as well.

See your local lawyer for the real details.

[blakdawg]

I have had only glancing exposure to investment clubs, and that's from a tax perspective, but they're typically structured as unincorporated associations or as partnerships. All gains & losses pass through to the members.

They typically only invest in registered, publicly traded securities - if someone is claiming that an "investment club" somehow escapes the rules about the registration of securities and securities dealers, a citation to the applicable regs/statute would be a good start.

[markm]

No wonder lemonade-stands are illegal. Or is that only lemonade stands that are not sole proprietorships?

(...Okay you go grab some sugar, I'll hit the grocery store, Fred does your house have an outside tap we can get water from? ...)

-MarkM-

[sunnankar]

I'm considering writing an exposé on The First Church of Satoshi (Bitcoin sounds too technical). We would be sharing (= trading) HappyPoints with each other or form groups to make people with special ideas/projects SuperHappy. Not sure how to fit in Cthulhu, though.

This is actually very creative and could prove very promising considering the difficulty in answering whether there is a property right in bitcoins.

Being able to form a religion, get it recognized, have a significant mass of adherents, form particular tenants with regards to bitcoins and tying it into both religious and political speech could grant some extremely potent Constitutional free speech protections; like The Church of the Flying Spaghetti Monster. That could make for an extremely interesting legal argument.

[payb.tc]

If this forum is considered a public place, and you advertise the sale of shares of a security (which only needs to pass the Howey test to qualify), then you are under the SEC jurisdiction in the US.

 

wouldn't that only apply if you are in the US?

[dentldir]

If this forum is considered a public place, and you advertise the sale of shares of a security (which only needs to pass the Howey test to qualify), then you are under the SEC jurisdiction in the US.

 

wouldn't that only apply if you are in the US?

Maybe.  IANAL, but if you are in the U.S. and advertise to other people in the U.S. then its SEC jurisdiction.  Even if the website is across the globe.

If you are not in the U.S. and advertise to people in the U.S., then it will come down to the local country willingness to cooperate with the SEC.  I think the FSA is more than willing to play ball in an investigation for instance. (U.K.).

If you are not in the U.S. and you advertise only to people not in the U.S., the the SEC has absolutely no jurisdiction to do anything to you.  Some other authority might though.

At least this is my understanding.

[blakdawg]

Maybe.  IANAL, but if you are in the U.S. and advertise to other people in the U.S. then its SEC jurisdiction.  Even if the website is across the globe.

If you are not in the U.S. and advertise to people in the U.S., then it will come down to the local country willingness to cooperate with the SEC.  I think the FSA is more than willing to play ball in an investigation for instance. (U.K.).

If you are not in the U.S. and you advertise only to people not in the U.S., the the SEC has absolutely no jurisdiction to do anything to you.  Some other authority might though.

At least this is my understanding.

A lot of this boils down not so much to law, but to political and practical questions - examples might be Julian Assange, Kim Dotcom, or Sonny Vleisides (the guy at BFL whose arrest/conviction created a lot of excitement here). In each of those cases, the US decided that what those people did, while they were outside the US' territorial boundaries, was offensive enough to the US that they were willing to devote considerable effort and resources to catching them and punishing them. I do not mention this to argue about the legitimacy or the validity of the US' actions, but to simply point out that they occurred. Someone else who achieves a high enough profile, though offshore, may find themselves in similar circumstances.

The US has always had a relatively expansive view of the reach of its regulatory jurisdiction, and has always had a very limited view of the reach of the US Constitution's protections of individual rights. (E.g., if you are in another country, the US can punish you for what you do there, but you cannot expect the protections of the US Constitution regarding search & seizure, interrogation, counsel, etc.) Both of these things have become even more exaggerated since 9/11/01 - to be honest, I haven't bothered tracking the precise contours of exactly what the US thinks it can do these days, since successive presidential administrations have been eager to exceed those contours, and the courts have been willing to go along with the project.

[pwnrman]

Maybe.  IANAL, but if you are in the U.S. and advertise to other people in the U.S. then its SEC jurisdiction.  Even if the website is across the globe.

If you are not in the U.S. and advertise to people in the U.S., then it will come down to the local country willingness to cooperate with the SEC.  I think the FSA is more than willing to play ball in an investigation for instance. (U.K.).

If you are not in the U.S. and you advertise only to people not in the U.S., the the SEC has absolutely no jurisdiction to do anything to you.  Some other authority might though.

At least this is my understanding.

A lot of this boils down not so much to law, but to political and practical questions - examples might be Julian Assange, Kim Dotcom, or Sonny Vleisides (the guy at BFL whose arrest/conviction created a lot of excitement here). In each of those cases, the US decided that what those people did, while they were outside the US' territorial boundaries, was offensive enough to the US that they were willing to devote considerable effort and resources to catching them and punishing them. I do not mention this to argue about the legitimacy or the validity of the US' actions, but to simply point out that they occurred. Someone else who achieves a high enough profile, though offshore, may find themselves in similar circumstances.

The US has always had a relatively expansive view of the reach of its regulatory jurisdiction, and has always had a very limited view of the reach of the US Constitution's protections of individual rights. (E.g., if you are in another country, the US can punish you for what you do there, but you cannot expect the protections of the US Constitution regarding search & seizure, interrogation, counsel, etc.) Both of these things have become even more exaggerated since 9/11/01 - to be honest, I haven't bothered tracking the precise contours of exactly what the US thinks it can do these days, since successive presidential administrations have been eager to exceed those contours, and the courts have been willing to go along with the project.

So for tl;dr the US government needs to take 3 steps back and mind their own business.

Now for rant:
So instead of simply saying "Hey, what you're doing isn't cool right now, but since it's not really harming anyone, and is a potential source of revenue we'll work something out so you can get the proper paperwork filled out and we could continue." they go ahead and say "Dum Dum is big an puwerfulls, we make your prison happen even tho u moar produktive reevnyou makin than the assholes who may or may not be using they welfare as weed munee"

Rant over.
We never have good Presidents because to get there you have to be paid in by your favorite corporation.
Maybe I could just lie, cheat, and steal my way up to presidency and THEN decide to be honest and get assassinated, like all the good presidents did.