Bitcoin Entrepreneur Settles Charges With the SEC

Bitcoin Entrepreneur Settles Charges With the SEC

A man who sold shares in two online ventures for bitcoins settled charges with the U.S. Securities and Exchange Commission on Tuesday for failing to register the offerings.

Erik Voorhees, a co-owner of FeedZeBirds and SatoshiDICE, agreed to disgorge $15,843.98 in profits plus pay a $35,000 penalty for a total of more than $50,000.

According to the SEC, Voorhees in May 2012 wrote a prospectus offering 30,000 shares of FeedZeBirds, which promises to pay bitcoins to Twitter users who forward its sponsored text messages. The offering raised 2,600 bitcoins—at the time worth about $15,000. Bitcoin, a nationless digital money that uses cryptography to control its creation and transactions, has seen its exchange rate against the U.S. dollar fluctuate from $5 to $1,200 per bitcoin since the 2012 offering.

The SEC said Voorhees did not register the offering with the SEC as required under the federal securities laws.

In two separate offerings from August 2012 to February 2013, Voorhees allegedly published a prospectus and solicited funds for bitcoin gambling site SatoshiDICE, selling 13 million shares and raising 50,600 bitcoins worth more than $700,000 at the time. The site later returned these offering proceeds to investors in a buy-back transaction in July 2013.

“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,” Andrew Ceresney, director of the SEC’s Division of Enforcement, said in a written statement. “We will continue to focus on enforcing our rules and regulations as they apply to digital currencies.”

Voorhees was represented by Brian Klein, a partner at Baker Marquart in Los Angeles. In a post published on Reddit, Vorhees said, “With this matter resolved, I look forward to helping to build the b itcoin industry and the future of finance.”

Contact Jenna Greene at jgreene@alm.com or on Twitter @JGreeneJenna.

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