SEC settles charges against SatoshiDICE founder Erik Voorhees

Earlier this year, the U.S. Securities and Exchange Commission (SEC) began an investigation into popular bitcoin-backed gambling site SatoshiDICE and its founder Erik Voorhees. The charges stem from the initial public offering of SatoshiDICE and related startup FeedZeBirds, both of which took place in the U.S. without registering as securities with federal authorities. Given that the startups were funded entire on bitcoin, and that neither the SEC or the IRS had any official policy about bitcoin’s legal status at the time, there is considerable gray area about what level of liability Voorhees would even have. The situation is further complicated by the fact that Voorhees sold the site in July of 2013 for a reported 126,315 BTC (worth about $85 million today).

A press release published today by the SEC clarifies the charges:

An SEC investigation found that Erik T. Voorhees published prospectuses on the Internet and actively solicited investors to buy shares in SatoshiDICE and FeedZeBirds. But he failed to register the offerings with the SEC as required under the federal securities laws. Investors paid for their shares using Bitcoin, a virtual currency that can be used to purchase real-world goods and services and exchanged for fiat currencies on certain online exchanges. The profits ultimately earned by Voorhees through the unregistered offerings totaled more than $15,000.

Although Voorhees made quite a bit of money from the two IPOs, the SEC settlement reached with Voorhees seems quite small. In addition to agreeing to a five-year ban from making new bitcoin security offerings, Voorhees turned over nearly $16,000 in profits and paid a penalty of $35,000.