Yesterday, the Securities and Exchange Commission (“SEC”) announced that Erik Voorhees (“Voorhees”), co-owner of Bitcoin-related websites SatoshiDICE and FeedZeBirds, has agreed to pay approximately $50,000 to settle allegations regarding the unregistered sale of securities.
The SEC alleged that Voorhees violated the registration provisions of the federal securities laws by urging prospective investors to buy shares in SatoshiDICE, a Bitcoin gambling game, and FeedZeBirds, an app that promised to pay Twitter users in Bitcoins if they forwarded sponsored messages, without proper registration filings being in effect. According to the SEC, Voorhees allegedly requested that investors pay for their shares using Bitcoins.
Without admitting or denying the SEC’s findings, Voorhees consented to cease and desist from committing or causing future violations of the registration provisions. In addition to fully disgorging his $15,843.98 in profits, and paying a $35,000 penalty, Voorhees agreed not to participate in the issuance of any security in an unregistered transaction for any virtual currency, including Bitcoin, for a five year period. In regards to the regulation of Bitcoin by the SEC, Division of Enforcement Director Andrew J. Ceresney warned that “[a]ll 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.” He stressed that the SEC would “continue to focus on enforcing [SEC] rules and regulations as they apply to digital currencies.”
The SEC’s press release announcing the Voorhees settlement referred readers to the Commission’s May 7, 2014 Investor Alert regarding fraud risks associated with “Bitcoin and Other Virtual Currency-Related Investments.” The SEC also issued an alert covering the use of virtual currencies in Ponzi schemes last summer, when it filed a complaint against Trendon Shavers alleging that he was engaged in a Ponzi scheme by soliciting investments in his company, Bitcoin Bank & Trust.