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Man Who Issued Securities For Bitcoins Settles With SEC
MrBingoBoingo writes with news that the U.S. Securities and Exchange Commission has settled federal civil charges with Erik Voorhees, a man who sold shares of two businesses in exchange for Bitcoins without registering them. Voorhees must make restitution for the $15,000 in profit he made, plus interest, and a $35,000 fine. Here's the SEC's filing (PDF). "The agreement reflects an expanded effort by U.S. regulators to cast a wider net over the burgeoning bitcoin economy. It comes as investor enthusiasm grows for direct offerings of shares by new bitcoin-focused ventures over bitcoin's global computer network. Maidsafe, a system for sharing computer memory, raised $7 million last month in such a deal."
...we all know that issuers of fiat money and securities are not going to take bitcoin et al lying down. Ditto the tax man.
Don't try to run from his brother.
The dude broke the law. A very real, very good (shockingly) law.
Doesn't matter if he offered securities for bitcoin, bushels of corn, or steamy massages. The currency isn't the problem with what he did.
That's a routine sale of unregistered securities case. If he'd sold them for dollars or yen, the SEC would have done the same thing. Bitcoin is irrelevant here.
I take it you are perfect. Do you blame the police when someone gets murdered?
Because the SEC's job isn't to stop stupid. Its job is to stop fraud. Distinguishing the two can be tricky. Selling unregistered securities is one area that has been designated at fraudulent. Selling over overpriced or excessively risky investments has not been designated fraud as long as the buyer isn't knowingly fed false information.
The world is made by those who show up for the job.
Maidsafe, a system for sharing computer memory, raised $7 million last month in such a deal.
I have this horrible feeling that I don't even want to know what that is...too afraid to even google it
They are foreseeable in hindsight. At the time there was a lot of reasonable debate about what was happening and what the consequences would be, with very little prediction of the scale that occurred.
Though to be fair, the securities were being packaged so that the risk was intentionally hidden, which could reasonably be considered fraud. If not so profitable it probably would have been considered illegal. More importantly, if some small time scam artist was doing the same practice they probably would have been charged.
Vorhees is a man who is an extremist libertarian to the point of nearly being an anarchist. He spent most of the last few years hating on regulators and government in general, and moved to Panama to escape US regulation. He is one of the foremost in the "Bitcoin can't be regulated" school of thought. So the fact that he's now sending a big pile of dollars to the US Govt is .... ironic.
Still, the real question here is the merits of the case. A Twitter spamming service and a gambling site are hardly businesses making great contributions to society but he doesn't seem to have actively hurt anyone by issuing these securities. The filing suggests all he had to do, to be legal, was file a registration statement with the SEC. I wonder how much effort is involved in doing that. Is it one of those cases where it's extremely hard to be legally compliant for a relatively small $337,000 raise or could he have easily gone through the registration process?
I bet the sticking point would have been the exchanges. MPEx is shady as hell.
Similarly, because murders still happen, we don't need the police.
Police don't necessarily prevent murder, but they are there to clean up the mess. SEC is trying to prevent murder, and failing miserably.See "Mortgage Backed Securities".
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
SEC isn't just an organisation that gives a stamp of approval to well run investment schemes. They actively stamp out any that don't register with them and report to them. That makes the entire economy very vulnerable to poor decision making by a mere handful of people.
No, what it does is help keep crooks from putting forth "investments" that really are just frauds. It's the same reason we require drugs to get FDA approval before being sold to the public.
It also can seriously hinder innovation
You REALLY don't want fast paced financial "innovation". That was a huge part of how we got into the big recession in 2008-9. A lot of "financial innovation" is really fraud with a clever name.
If the SEC lost their enforcement powers
The SEC has their enforcement power for some extremely good reasons. There needs to be a cop on the beat.
Police don't necessarily prevent murder, but they are there to clean up the mess.
Go live somewhere were there aren't any police (like Somalia) and let me know how that works out for you. I'm sure you'll live a long an prosperous life.
I would go a step further, in that the SEC was completely complacent in the whole Banking Investment fraud that led up to the collapse of the economy.
If you want to blame anyone, blame Congress. The SEC is badly underfunded and that is entirely the fault of Congress. I won't get into the politics of why but you can probably guess the various political motives involved. The SEC simply doesn't have the funding or the manpower to oversee what they've been charged with managing adequately.
Honest answer: Yes, there is a big difference. The difference is selling stuff vs. selling shares. I've contributed to Evil Hat kickstarters, and gotten stuff from them, but I have no connection with them other than as a customer. I don't own any part of the company.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes