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SEC Settles Case Against Unregistered Bitcoin-Denominated Stocks

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Bitcoin entrepreneur Erik Voorhees will pay more than $50,000 to settle charges by the Securities and Exchange Commission that he failed to register a stock offering.

Voorhees published prospectuses and solicited investors to buy shares in SatoshiDice and FeedZeBirds, the agency said in a release. Though the stock was denominated in bitcoins, which can be used for purchases and can be exchanged into fiat currency, Voorhees still broke the law, the SEC said.

"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 J. Ceresney, director of the SEC's Division of Enforcement, said in an e-mailed statement. "We will continue to focus on enforcing our rules and regulations as they apply to digital currencies."

Voorhees agreed to settle the SEC's charges by paying full disgorgement of about $15,844 in profits plus a $35,000 penalty for a total of more than $50,000. Voorhees, who didn't admit or deny wrongdoing, also promised not to participate in any unregistered issuances for five years, the release said. His lawyer, Brian Klein, didn't immediately respond to a request for comment.

Voorhees first raised money in May 2012 by offering shares in FeedZeBirds, which promised payments to Twitter users who relay sponsored text messages. In two offerings for SatoshiDice, a gambling site, in August 2012 and February 2013, he raised 50,600 bitcoins, worth about $722,659 at the time, the release said.

Bitcoin, the most popular digital currency, emerged from a 2008 paper written by an anonymous programmer or group of programmers. It uses a public ledger to record transactions made under pseudonyms, and transactions are cryptographically signed for security. Because it has many of the same properties as traditional currencies, entrepreneurs have used it to create securities, such as shares and derivatives.

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