Are SatoshiDice and MPEx under SEC investigation?

If a recent post by often-controversial bitcoin personality Mircea Popescu is to be believed, the U.S. Securities and Exchange Commission has focused their gaze on well-known bitcoin gambling site SatoshiDice. Popescu posted a series of emails he exchanged with SEC senior attorney Daphna Waxman, who was requesting information about the listing of shares of SatoshiDice on the Popescu-owned exchange MPEx.

Waxman’s first letter makes it clear that the SEC is looking into SatoshiDice, MPEx and noted bitcoin entrepreneur Erik Voorhees.

As part of our investigation of SatoshiDICE, we would like to request that MPEx voluntarily provide certain documents to us: (1) a list of all SatoshiDICE shareholders prior to the sale of the company in July 2013(preferably by name, address, or BTC address); and (2) an account history for Mr. Erik Voorhees showing the sale of shares, payment of dividends etc.

In the correspondence, Popescu challenged frequently challenged SEC authority to request any information from the Romania-based company, and demanded to know “the legal basis upon which the SEC is investigating a Bitcoin enterprise.”

This would customarily come in the form of an Act of Congress specifically authorising the SEC to review MMORPGs and online activities involving such computer games and their virtual currencies, be they WoW gold, Linden Dollars, EVE Isk, Bitcoin, etc and so forth. Absent that, it may come in the form of a court ruling – definitive and irrevocable or whatever the equivalent of that may be at common law – judging the SEC has such authority.

While the interaction itself is an interesting read, the implications of SEC investigations in bitcoin-based stock exchanges could be wide ranging. With Havelock Investments and 796 both gaining traction in recent months, negative pressure from the SEC could have a huge chilling effect.

The SEC has a broad-ranging authority over investments in the U.S., but its authority over virtual currencies and virtual stock exchanges is still murky at best. The SEC does not have criminal authority, but does have substantial civil authority and close relationships with law enforcement agencies. The exact nature of the SEC investigation is still unclear.

SatoshiDice claims to have blocked all U.S. based IPs since May of 2013 citing legal issues, and the company’s servers are located in Ireland. The company’s estimated value in 2012 was around $8.9 million. The company was founded by BitInstant co-founder Erik Voorhees, and sold to an unknown company in July of 2013. SatoshiDice was never registered with SEC.