SEC Charges Bitcoin Entrepreneur For Share Offering
marketwatch.com
marketwatch.com
Voorhees agreed to settle the SEC’s charges by paying full
disgorgement of the $15,843.98 in profits plus a $35,000
penalty for a total of more than $50,000.
http://www.reddit.com/r/Bitcoin/comments/1yx2t5/erik_voorhee...
http://www.reddit.com/r/Bitcoin/comments/1yv6ph/some_words_f...
Cupcakes represent a stable, decentralized currency with a proof-of-work (you had to bake a cupcake to get one!). No government can stop my cupcake transactions.
This is the future.
It looks to me that it just changes the expression slightly, and not for net social benefit. People gamble or day-trade-on-margin or over-leverage-in-real-estate or wire-their-money-toNigerian-419-scams, when some longshots (including occasional frauds) as cryptocoin/venture investments would be no worse. And, they'd be plausibly better, because the process of aiming for business success, but still failing through misestimation, misexecution, or even malfeasance serves as valuable training for future success.
If you lose at your lottery scratcher 10 times in a row, the 11th is still an awful bet for you and society. But if you lose your investment principal 10 times, even if most of those times were total or borderline fraud, you will make usefully better choices, for yourself and society, in the 11th try.
(Or you'll just stick to other areas where you're more competent, which is fine, too.)
I too think lotteries are a little seedy, and it's a little weird how the state uses its vice regulating powers to create something of a vice monopoly to further its own ends, but surely you see how this comparison you're making is lacking in equivalence.
Because law and social-norm enforcement faces budgetary constraints in time/resources/attention, the (informal-not-really) "fallacy" of relative privation doesn't apply. We can only choose some activities to both demonize and punish; we should allocate that effort well.
State lotteries and state-sanctioned gambling monopolies are a lot more destructive than even dishonestly-marketed "cryptocoin IPOs" (where people know that caveat emptor applies and traditional legal recourse is difficult).
And, the enforcement action described here was against a fairly honest, successful cryptocoin venture, SatoshiDice, a far more moral operation than the California Lottery.
The SEC doesn't need to "do more", it needs to "do less". The government's limited attention, resources, and competence should be focused on crimes and fraud with real, actual victims. Not trivial violations-of-form.
They might, at most, qualify as foreign private issuer, so they can file with the SEC in private, but I strongly doubt they did it. http://www.sec.gov/info/smallbus/qasbsec.htm
Edit: For those asking why the American laws apply to this situation, it is because if you're raising money in America, American laws apply just like British laws would apply to Google if Google is doing business in Britain (or raising money there). If the company is registered in Scotland and raises money in Scotland, knock yourself out, the SEC doesn't care.
The essential character of "sovereign rights" is that they are unbounded except by voluntary restraint of the sovereign.
I can afford to fly to Scotland, and I am nowhere near a qualified investor...
Any claims that the SEC is vital to protecting Americans from financial fraud, maintain fair and orderly markets, and facilitate new capital are all quite soundly countered with a variety of phrases, such as "credit default swaps", "AIG", "MERS", "collateralized debt obligations", "naked short", "Bernie Madoff", "matters under inquiry", etc.
Your reasoning here is fallacious - the question is the current situation compared to the counter-factual without the SEC, not whether the SEC eliminates all malfeasance (whatever the regulatory climate and funding levels).
Of course, it's worth noting that the existence of a fallacious argument doesn't undermine the point it was trying to make; it just fails to support it.
With respect to the question, "can the SEC protect Americans from financial fraud?" the answer is no. Fraud occurs frequently, and of greatest recent notoriety and severity are the examples I alluded to. The SEC cannot protect; it can only punish. Just like Chief Wiggum.
As always, in free markets as well as regulated ones, you have to do your own research into your trade partners before deciding to trust them (caveat emptor). The SEC is just part of the institutional stagecraft that keeps the market from becoming paralyzed by mutual suspicion.
And since we cannot have two markets, one for control and one for experimentation, we cannot say with any reasonable certainty whether the malfeasance eliminated by the SEC is of greater or lesser magnitude than the malfeasance enabled by it. But we can say that the latter is most certainly not zero.
But in any case, lots of Bitcoin companies successfully navigate money-transmission laws already.
BTC isn't a currency in US. I'm kind of curious where SEC draws the line, if any, when somebody sells some interest in some virtual artifact - say a website or a Farmville plot of land - in exchange for some other virtual artifact - say BTC or ISK.
The SEC doesn't get involved in Farmville plots of land, any more than it gets involved in physical real estate. It's not involved if I sell you a gold coin or rare stamp, even if you hope to resell at a profit.
Cryptocurrencies seem more analogous to these things, rather than equities, debts, profit-sharing agreements, or anything else in the SEC's official definition of a security: