SEC Charges Bitcoin Entrepreneur with Offering Unregistered Securities (with Lofchie Comment)

The SEC charged the co-owner of two Bitcoin-related websites with publicly offering shares in both ventures without registering either of them.

According to the SEC Order, the co-owner of SatoshiDICE, a Bitcoin-betting game, and FeedZeBirds, which promised to pay Bitcoins to Twitter users who forwarded its sponsored text messages, published prospectuses on the Internet. According to the Order, the co-owner actively solicited investors to buy shares in the companies on Bitcoin-related websites as well as Facebook. Despite these general solicitations, no registration statement was filed with the SEC for the FeedZeBirds or SatoshiDICE offerings and no exemption from registration was applicable to these transactions.

Lofchie Comment: The interesting question is whether Bitcoins could be considered "securities" or "futures" and thus regulated directly by either the SEC or the CFTC. (It is not apparent that Bitcoins would fit into either such definition.) The SEC's Order does not address that question; the "securities" that formed the basis of the SEC's jurisdiction, not the Bitcoins themselves, were shares in a fund that engaged in Bitcoin-related activities.

See: SEC Order; SEC Press Release.
See also: SEC Investor Alert on Bitcoin and Other Virtual Currency-Related Investments.
Related news: Bitcoins in Bankruptcy: Trouble ahead for Investors and Bankruptcy Professionals? (March 27, 2014); IRS Provides Guidance on the Taxation of Bitcoin and Other Virtual Currency (March 26, 2014); FINRA Issues Investor Alert Regarding Bitcoin Risks (with Lofchie Comment) (March 12, 2014); Bitcoins; SEC Issues Fraud Charge and Alert; Conflict with CFTC to Come? (With Zwirb Comment) (JULY 23, 2013).