[2014-06-03] Marketwatch - SEC charges bitcoin entrepreneur for share offering

[uhoh]

http://www.marketwatch.com/story/sec-charges-bitcoin-entrepreneur-for-share-offering-2014-06-03

NEW YORK (MarketWatch) -- The Securities and Exchange Commission said Tuesday it charged Erik Voorhees with offering shares in two bitcoin-related websites without registering them, as required by federal securities laws. Voorhees allegedly published prospectuses and asked investors to buy shares in the two websites, SatoshiDICE and FeedZeBirds. Investors bought shares using the virtual currency bitcoin, leading to profits of more than $15,000 for Voorhees, according to the SEC. Voorhees agreed to settle the charges by giving up the profits of $15,843.98 and paying a penalty of $35,000. "All issuers selling securities to the public must comply with the registration provisions of the securities laws, including issuers who seek to raise funds using Bitcoin," said Andrew J. Ceresney, director of the SEC's Division of Enforcement.

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[Bitcopia]

Going after "profits of more than $15,000"    ... good to see the SEC has got its priorities straight.

No victim, no crime.

This is a ridiculous move. The only justification I can think of (and I don't say justification to mean I agree) is that if they let this one go, there might be a major influx of similar offerings. The thing is, I'm not sure they will be able to stop this kind of thing in the end. As we have learned from P2P file sharing, so long as there is demand, you can not take down a distributed system.

[LiteCoinGuy]

"penalty of $35,000"


for a guy with probably 100 million USD alot 

[kjlimo]

Haha, wonder how many bitcoins he had to cash out to settle that... 0.005% of his holdings?

[TraderTimm]

There are a few more implications that aren't discussed in this settlement.

1. The SEC has his name on file from the charge, which means increased scrutiny if he ever bothers to do business in the USA or with a company that has business dealings in the United States.

2. The site which he used to sell shares is likely under scrutiny, as well as similar "Virtual Bucket Shops".

3. The IRS will likely come calling looking for their cut of the action, since it is unlikely he bothered to file in association with his earnings, which would impact every Bitcoin earned from said business.

[Carlton Banks]

Well, I hope this is a wake up call to US based cryptocurrency entrepreneurs: once you've earned enough to afford to transfer your legal residency to somewhere else, do it. The moral justification for a corrupt regulatory system demanding money from entrepreneurs who do not use their system is highly questionable. Paying the fine hasn't changed the salient facts that prompted the actions of the SEC; Satoshi Dice or FeedZeeBirds are still not listed on any US stock exchange. And so what has their action righted that was wrong?

[dave111223]

How did they arrive at $15,000 profit?  I was under the impression he cleaned up millions from Satoshidice?

[kjlimo]

Well, I hope this is a wake up call to US based cryptocurrency entrepreneurs: once you've earned enough to afford to transfer your legal residency to somewhere else, do it. The moral justification for a corrupt regulatory system demanding money from entrepreneurs who do not use their system is highly questionable. Paying the fine hasn't changed the salient facts that prompted the actions of the SEC; Satoshi Dice or FeedZeeBirds are still not listed on any US stock exchange. And so what has their action righted that was wrong?

I think the point is that they weren't listed on any US stock exchange... but were acting like securities... which is against the rules.

We have rules to protect people.  I agree that if you don't like the rules of a country you should move somewhere else.... but just "legally" moving your residency somewhere else and then spending your entire life in another country just so you can circumnavigate the rules also seems questionable... so I'm not sure what makes you feel better going about it this way...

[giszmo]

How did they arrive at $15,000 profit?  I was under the impression he cleaned up millions from Satoshidice?

He sold all his shares to F. Vorhees long before he made any big profits

[bryant.coleman]

He sold all his shares to F. Vorhees long before he made any big profits

Who is F.Voorhees? His brother?

Why did he sold his shares? Seems more like a ploy to avoid responsibility to me.

[giszmo]

He sold all his shares to F. Vorhees long before he made any big profits

Who is F.Voorhees? His brother?

Why did he sold his shares? Seems more like a ploy to avoid responsibility to me.

F just happened to be the next letter after E. This whole anonymous stock exchange thing is perfect to declare all stocks as sold while you still have them all.

[bryant.coleman]

F just happened to be the next letter after E. This whole anonymous stock exchange thing is perfect to declare all stocks as sold while you still have them all.

Oh... things are getting clearer.

I don't have any sympathies for Erik Voorhees. Let the law take its course.

[Carlton Banks]

Well, I hope this is a wake up call to US based cryptocurrency entrepreneurs: once you've earned enough to afford to transfer your legal residency to somewhere else, do it. The moral justification for a corrupt regulatory system demanding money from entrepreneurs who do not use their system is highly questionable. Paying the fine hasn't changed the salient facts that prompted the actions of the SEC; Satoshi Dice or FeedZeeBirds are still not listed on any US stock exchange. And so what has their action righted that was wrong?

I think the point is that they weren't listed on any US stock exchange... but were acting like securities... which is against the rules.

We have rules to protect people.  I agree that if you don't like the rules of a country you should move somewhere else.... but just "legally" moving your residency somewhere else and then spending your entire life in another country just so you can circumnavigate the rules also seems questionable... so I'm not sure what makes you feel better going about it this way...

What protection would a bitcoin entrepreneur have to gain by registering their asset instruments with the SEC? They would probably have been, at best, unable to enter the marketplace, or at worst, charged with a different crime. Using a non-official channel was the most realistic prospect that Eric Voorhees had of himself being adequately protected, as well as that of any shareholders in the two ventures.

Face it. There is no moral or ethical crime here, simply a business owner legitimately trying to protect his interests.

[Ron~Popeil]

Well, I hope this is a wake up call to US based cryptocurrency entrepreneurs: once you've earned enough to afford to transfer your legal residency to somewhere else, do it. The moral justification for a corrupt regulatory system demanding money from entrepreneurs who do not use their system is highly questionable. Paying the fine hasn't changed the salient facts that prompted the actions of the SEC; Satoshi Dice or FeedZeeBirds are still not listed on any US stock exchange. And so what has their action righted that was wrong?

I think the point is that they weren't listed on any US stock exchange... but were acting like securities... which is against the rules.

We have rules to protect people.  I agree that if you don't like the rules of a country you should move somewhere else.... but just "legally" moving your residency somewhere else and then spending your entire life in another country just so you can circumnavigate the rules also seems questionable... so I'm not sure what makes you feel better going about it this way...

What protection would a bitcoin entrepreneur have to gain by registering their asset instruments with the SEC? They would probably have been, at best, unable to enter the marketplace, or at worst, charged with a different crime. Using a non-official channel was the most realistic prospect that Eric Voorhees had of himself being adequately protected, as well as that of any shareholders in the two ventures.

Face it. There is no moral or ethical crime here, simply a business owner legitimately trying to protect his interests.

His crime was not giving them their cut. The US government is like the mafia. You gotta give your protection money.

[notthematrix]

he should go offshore.

[Ron~Popeil]

he should go offshore.

Part of any solid business plan has to consider the threat governments pose to your business. His mistake was a foolish one for sure but the idea that a crime was committed when no one was hurt makes it pretty clear what the SEC is about. 

[notthematrix]

he should go offshore.

Part of any solid business plan has to consider the threat governments pose to your business. His mistake was a foolish one for sure but the idea that a crime was committed when no one was hurt makes it pretty clear what the SEC is about.  

true only elite's get this in there standard education , they know what this is about.
only public school education lack this info.
for all the financial rules  there is a legal exempt.
A nice introduction to this world can be seen here http://www.youtube.com/watch?v=d4o13isDdfY
And yes this is why Iam sure bitcoin will sucseed , because of this exsisting legal shadow world.

[Ron~Popeil]

he should go offshore.

Part of any solid business plan has to consider the threat governments pose to your business. His mistake was a foolish one for sure but the idea that a crime was committed when no one was hurt makes it pretty clear what the SEC is about.  

true only elite's get this in there standard education , they know what this is about.
only public school education lack this info.
for all the financial rules  there is a legal exempt.
A nice introduction to this world can be seen here http://www.youtube.com/watch?v=d4o13isDdfY
And yes this is why Iam sure bitcoin will sucseed , because of this exsisting legal shadow world.

You get a fast education when you get into bit coin for sure. I have learned more here in a few months than I did in four full years of college.

[runam0k]

Part of any solid business plan has to consider the threat governments pose to your business. His mistake was a foolish one for sure but the idea that a crime was committed when no one was hurt makes it pretty clear what the SEC is about. 

I have some sympathy (it's far easier for rich people to raise capital because they can sell privately and/or employ experts to ensure compliance) but the old "no one was hurt" thing doesn't cut it.  It's a bit like saying, "there is no speed limit and you're fine to pass school buses dropping off kids unless you hit someone, so go for it".

Besides, it wasn't a crime in the sense that the guy now has a criminal record.  Rather it was an offence and he is liable to pay a fine and suffer a ban on issuing securities.

[notthematrix]

Part of any solid business plan has to consider the threat governments pose to your business. His mistake was a foolish one for sure but the idea that a crime was committed when no one was hurt makes it pretty clear what the SEC is about. 

I have some sympathy (it's far easier for rich people to raise capital because they can sell privately and/or employ experts to ensure compliance) but the old "no one was hurt" thing doesn't cut it.  It's a bit like saying, "there is no speed limit and you're fine to pass school buses dropping off kids unless you hit someone, so go for it".

Besides, it wasn't a crime in the sense that the guy now has a criminal record.  Rather it was an offence and he is liable to pay a fine and suffer a ban on issuing securities.

True it was naver a crime , but the rule is if you set up some thing new with money , you cant use local infrastructures!