updated 04:24 pm EDT, Wed June 4, 2014
Agreement requires Erick Voorhees to surrender profits, pay $35000 in fines
Erik Voorhees, a co-founder of FeedZeBirds and SatoshiDice, has settled with the United States Securities and Exchange Commission (SEC) over charges related to selling shares of the two companies. Information from the SEC says that Voorhees had solicited the sale of shares in open channels as early as 2012, netting himself over $15,000 in profit in the process.
In the release, the SEC laid out some of the issues with Voorhees's attempt to sell shares. Raising the funds was flagged in part because of the solicitation occurred over message boards and Facebook. On one such forum, Bitcointalk.org, the buy-in was referred to as an IPO for FeedZeBirds. However, neither of the money-raising efforts for the two sites were ever exempted from registration by the SEC.
Another problem was with how people investing in the companies would pay for their shares. Many of the payments were done with Bitcoins, a currency that isn't regulated by the United States, but is taxable according to the IRS. The SEC says that 2,600 Bitcoins were raised when 30,000 shares of FeedZeBirds were sold in May 2012. From August 2012 to February 2013, the Bitcoin betting site SatoshiDice sold 13 million shares to bring in 50,600 Bitcoins. SatoshiDice would later return the proceeds of the sale to investors in a July 2013 buy-back.
The order from the SEC found that Voorhees violated sections of the Securities Act of 1933. Voorhees would then agree to not commit any further violations until he had either admitted or denied the findings from the SEC. Part of the agreement would keep him from issuing any unregistered security transactions for virtual currencies for five years. He would also have to give up the full profits, which were over $15,000, and pay a $35,000 fine imposed by the SEC.
"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," said the director of the SEC Division of Enforcement Andrew Ceresney. "We will continue to focus on enforcing our rules and regulations as they apply to digital currencies."
Voorhees agreed to settle the charges, but still offered no admittance of guilt. He posted a small statement on Reddit yesterday, saying only that the issue is resolved and he looks "forward to helping to build the Bitcoin industry and the future of finance." He then directed any questions to his legal counsel.