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Bitcoin The Almighty Buck Government United States

Man Who Issued Securities For Bitcoins Settles With SEC 56

Posted by Soulskill
from the if-it's-not-money,-it's-close-enough-for-government-work dept.
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."
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Man Who Issued Securities For Bitcoins Settles With SEC

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  • ...we all know that issuers of fiat money and securities are not going to take bitcoin et al lying down. Ditto the tax man.
    • by Anonymous Coward on Wednesday June 04, 2014 @02:28AM (#47162367)

      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.

      • by SuricouRaven (1897204) on Wednesday June 04, 2014 @03:02AM (#47162441)

        The only issue that involves bitcoin specifically is enforcement. If he hadn't been so public, the crime could have gone unnoticed - there are no reporting requirements. If you move more than $10,000 or so in a conventional bank, it'll set off alarms and someone will come to see what is going on.

      • by IamTheRealMike (537420) <mike@plan99.net> on Wednesday June 04, 2014 @08:53AM (#47163501) Homepage

        The dude broke the law. A very real, very good (shockingly) law.

        Is it good?

        I don't think there's any problem with governments competing against ratings agencies: I think 2008 showed pretty conclusively that the existing private sector organisations kind of suck at protecting people from risk. But the 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. It also can seriously hinder innovation: look at the glacial speed of progress towards the oh so ambitious goal of "not killing crowdfunding sites". You'd think not doing something would be easier, wouldn't you, but it's taking years and an 800+ page report.

        If the SEC lost their enforcement powers and just acted as a place where reputable, respectable fundraisers wanted to go it'd be pretty unobjectionable and there'd be natural flex in the system if they started making bad decisions. They'd give Moody's a run for their money. But it's not like that. They probably stopped some scams by virtue of the threat of their enforcement actions, it's hard to know how many, but they probably also stopped a lot of legitimate and non-scam investments too. The cost/benefit ratio of securities laws is rather hard to know.

        • by Archangel Michael (180766) on Wednesday June 04, 2014 @10:52AM (#47164261) Journal

          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. They failed, completely, to understand the "new" derivative investments and thus the problems associated with compounded leveraging, that they of all people should have recognized.

          IMHO when a organization, which has one task, fails to manage in their duties in such a complete way as this, the whole thing needs scrapped. Caveat Emptor is heartless, but it is heartless at both ends. However if you break the law, you should go to jail. Too bad our elected officials were in on the scam and thus nobody is going to jail for the theft and fraud that was perpetrated on our country (and the world)

          • 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 [fool.com] 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.

            • If you want to blame congress, then blame the people who keep electing the same two corrupt parties (that would be "we the people") We get what we deserve. I don't trust the government, because I don't trust the people voting for government. I trust myself to do what is right for me and mine, and I'm willing to accept that risk.

              The SEC isn't underfunded, it cannot perform its basic duties at any funding level, simply because the rest of the system doesn't want it to. And since we the people keep voting for

        • by lgw (121541)

          That's libertarian fantasy not grounded in history. The SEC has not arrogated itself powers at random: no one like giving the government regulator power more than the sort of people who own stock and commodity exchanges, and those people have quite significant political power. SEC rules, just like exchange rules, have grown over time in response to a long history of very real disasters, abuses, and scandals.

          While the combination of exchange rules and SEC rules might be slightly larger than the minimum via

          • by Darinbob (1142669)

            Although the SEC has problems because it's not truly independent in its thinking. It is full of people from the very industry it is regulating, which causes it to have the same blind spots as the industry (ie, showing no concern over mortgage derivatives). A good regulatory body should be full of skeptics and doubters.

            • by lgw (121541)

              Well, the SEC has a very specific issue of being thoroughly corrupted by Goldman Sachs, there's no doubt of that. But it doesn't have a problem with over-regulating markets.

              The financial exchanges actually went to the SEC asking for mortgage derivatives to be exchange-traded. That would have avoided the problem (not the real estate bubble, but the massive affect it had on investment banks), and everyone not in the pocket of those few banks understood the need and its magnitude. Sigh.

        • 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.

          • by Darinbob (1142669)

            Basically most of the economy is about person A selling something to person B. Many of the financial "innovations" involve ways for person C to get a piece of that transaction.

        • by ultranova (717540)

          It also can seriously hinder innovation: look at the glacial speed of progress towards the oh so ambitious goal of "not killing crowdfunding sites".

          Is the purpose of a crowdfunding site to fund a project or separate fools from their money? If it's the former, what's stopping someone from putting up another that does the latter? Given that the author of a project might simply hide the money and run rather than spend it on the project, what constitues due diligence on the part of the site to release them fro

        • by jklovanc (1603149)

          If the SEC lost their enforcement powers

          They could no longer enforce the rules and companies could do anything they wanted. Do you really see a good outcome there?
          The SEC is not there to directly protect people from risk. It is about information and rules. Without the SEC the following things can happen.
          1. This year we don't want to have a AGM. (We want to stay in power. We have your money what do we care what you think?)
          2. This year we won't produce an annual report. (Profits are down and we don't want investors to see that).
          3. Those voting shar

    • by jythie (914043) on Wednesday June 04, 2014 @05:51AM (#47162809)
      So.... equal treatment is 'not taking it lying down'? That is less like striking back and more like official recognition with all the rights and responsibilities that affords.
  • by Anonymous Coward

    Don't try to run from his brother.

  • by Animats (122034) on Wednesday June 04, 2014 @02:36AM (#47162385) Homepage

    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.

  • by Anonymous Coward

    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

  • Ironic (Score:3, Insightful)

    by Anonymous Coward on Wednesday June 04, 2014 @07:05AM (#47163019)

    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.

    • by tomhath (637240)

      So the fact that he's now sending a big pile of dollars to the US Govt is .... ironic.

      There is nothing ironic (or surprising) about a guy who thinks he doesn't need to play by the rules getting caught and fined.

    • by PPH (736903)

      and moved to Panama to escape US regulation.

      all he had to do, to be legal, was file a registration statement with the SEC.

      Why? He's doing business from Panama. US regulators can FOAD if they think they have the right to regulate the planet. If some US investors bought these securities, then that shoud be between them and the SEC. Not Vorhees.

      • Re:Ironic (Score:4, Informative)

        by Minwee (522556) <dcr@neverwhen.org> on Wednesday June 04, 2014 @11:39AM (#47164739) Homepage

        Why? He's doing business from Panama. US regulators can FOAD if they think they have the right to regulate the planet. If some US investors bought these securities, then that shoud be between them and the SEC. Not Vorhees.

        That's nice, dear.

        "Voorhees, age 29, is a U.S. citizen who, at the time of the FeedZeBirds and SatoshiDICE offerings, was living in the United States."

        [...]

        "As a result of the conduct described above, Voorhees violated Sectons 5(a) and 5(c) of the Securities Act, which prohibit the direct or indirect sale of securities, offer to sell or offer to buy securities through the mails or interstate commerce unless a registration statement has been filed or is in effect. "

        So a US citizen, living in the US, sells securities to US investors in violation of US law, but he should walk because he used a .PA email address to do it?

        Okay, that makes sense. It's not very much different from how a US citizen is able to make a phone call to Romania to hire a hit man. That's totally legal because part of the call takes place in another country, right?

  • Glad to see the FCC is focusing their efforts of the important stuff. I'd hate it if they were bothering with unimportant issues. [cnn.com]

Aren't you glad you're not getting all the government you pay for now?

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