The Securities and Exchange Commission (SEC) of the United States today released a press release regarding Erik Voorhees and Satoshi Dice. The SEC has found that Erik Voorhees violated SEctions 5(a) and 5(c) of the Securities Act of 1933 with his unregistered Bitcoin IPOs. Earlier this year, the SEC launched an investigation into the online gambling website Satoshidice.com to inquire as to whether or not the company broke any American laws in its only Bitcoin IPO and subsequent stock run. The SEC’s investigation into Satoshi Dice was first revealed by Mircea Popescu of MPEx, the original platform that Satoshi Dice was released and traded on. In January, the SEC’s enforcement director, Andrew Ceresney said the agency is “very focused” on the legal status of Bitcoin-denominated stock exchanges in America. Obviously, such securities-trading platforms are supposed to be licensed under the SEC. Previously, the SEC made its first legal forays “on the behalf of Bitcoiners” by taking down Trendon Shavers, also known as Pirateat40, for running the infamous Bitcoin Savings & Trust ponzi scheme.
[dropcap size=small]T[/dropcap]hough the SEC investigation alleges that Erik Voorhees profited over $15,000 from his sale of unregistered offerings, the total settlement cost total more than $50,000. In the conclusion to this SEC investigation, Erik Voorhees has agreed to pay a full disgorgement of his profits of $15,843.98 plus a penalty of $35,000. Additionally, Voorhees has committed to not participating “in any issuance of any security in an unregistered transaction in exchange for any virtual currency including Bitcoin for a period of five years.” However, it is important to note that Voorhees has consented to the SEC ban and the SEC monetary penalty “without admitting or denying the SEC’s findings.” Sometime in 2013, American users of satoshidice.com were blocked for having United States’ IP addresses. Despite this menial roadblock, Satoshi Dice transactions were a large percentage of total Bitcoin network traffic for quite some time.
FeedZeBirds is another Bitcoin security that Erik Voorhees offered on the Bitcoin Forum prior to his fundraising for Satoshi Dice. Like his Satoshi Dice IPO, FeedZeBirds was advertised on the Bitcoin Forum and raised 2,600 bitcoins in May of 2012. The SEC took offense to the fact that Voorhees did not file the registration for FeedZeBirds or for Satoshi Dice. It’s a good thing that the large Bitcoin related fund set up by the Winklevoss twins is seeking the proper channels of approval from the SECNeedless to say, Erik Voorhees isn’t the first Bitcoiner to be fined by the SEC, he certainly won’t be the last. Andrew J. Ceresney, the director of the SEC’s Division of Enforcement, had this to say:
“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. We will continue to focus on enforcing our rules and regulations as they apply to digital currencies.”
From August 2012 to February 2013, Satoshi Dice raised 50,600 bitcoins that were worth approximately $722,659 at the time. The S.DICE security was originally issued on MPEx; however, pass-throughs provided by large volume holders soon appeared on Havelock Investments and other Bitcoin security sites that have since gone under. S.DICE’s run as a Bitcoin security ended in July of 2013 when Erik Voorhees announced his sale of Satoshi Dice to an anonymous party for a large total of Bitcoin. The S.DICE investors received 45,500 bitcoins that, due to the rise in exchange rate, was worth many times more than their initial investment. Said anonymous party is still running the site today under classic.satoshidice.com. Interestingly, the new Satoshi Dice also warns American players on their site, though the inherent functionality of Bitcoin Dice games means that gambling can occur completely on the blockchain and without use of the website at all.