If you’re going to sell shares in your business and are soliciting for funds publicly, there are rules you have to follow. And Erik Voorhees recently found out there are rules to follow even if you’re selling shares for bitcoin.
Today the U.S. Securities and Exchange Commission (SEC) announced that after raising $15,843.98 for his ventures SatoshiDICE and FeedZeBirds, Voorhees will pay that amount in “full disgorgement” along with $35,000 in fees for failing to comply with registration requirements that companies looking to sell equity publicly must adhere to.
The SEC’s release on the matter is rigid: “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.” Bitcoin: Not disrupting the process by which private companies raise money from the public.
Giggles aside, there is a hidden gem worth discussing in the SEC’s release. See if you can spot why the following is hilarious:
According to the SEC’s order instituting a settled administrative proceeding, the first unregistered offering occurred in May 2012 as 2,600 bitcoins were raised through the sale of 30,000 shares in FeedZeBirds, which promises to pay bitcoins to Twitter users who forward its sponsored text messages. Then in two separate offerings from August 2012 to February 2013, SatoshiDICE sold 13 million shares and raised 50,600 bitcoins that were worth approximately $722,659 at the time.
Did you catch it? The fun bit is that those 50,600 Bitcoins would today be worth, at general market rates, $33,648,494, not $722,659. Bitcoin, noted for its volatility, has been on an upswing in recent weeks, padding that comparison, but it remains humorous all the same.
So if you are going to raise money for your business, especially if it is a gambling business, and you are going to solicit funds on public forums, even in bitcoin, you need to play by the rules that the normals with their old-school fiat fetish invented.IMAGE BY Bryce Durbin