One Bitcoin Is Worth about $200 US Dollars
The U.S. Security and Exchange Commission announced it would conduct an injury into Satoshi Dice, an online gambling website which sold Bitcoin-denominated stock. The SEC believes such sales may break United States laws.
This week, the Securities and Exchange Commission sent a letter to the online exchange MPEx, a Bitcoin-based trading exchange. They federal agency wants MPEx to provide contracts and related documents involving SatoshiDice.com. This was reported on a Trilema, a website which reports such stories.
MPEx Contacted through SEC Letter
Mircea Popescu, the MPEx operator contacted by the SEC, confirmed to Bloomberg News that of the federal inquiry. Popescu stated that MPEx had broken no laws. Without announcing which laws might have been broken, Popescu confirmed SatoshiDice is the subject of the investigation.
Popescu asserted in an Internet chat message that U.S. securities laws do not apply to Bitcoin (or MPEx), because Bitcoin is not legally defined as “money”. Popescu added, “There’s no discussion of breaking laws. Somebody wants to propose I broke a law, they’re to come up with the law I broke.”
SEC Trying to Determine Law
This latest inquiry comes two months after the SEC’s enforcement director, Andrew Ceresney, said his agency is focused on whether Bitcoin-denominated stock exchanges are legal or illegal. Under United States law, any securities trading platforms must be licensed to conduct legal trading of stocks.
Despite the inquiry, regulators at the SEC have not yet stated whether any rules were broken. In fact, their letter to MPEx said their staff had not yet concluded yet whether laws were broken.
When asked about the SEC’s stance on such trading, Mr. Ceresny said, “You can invest in those companies with your Bitcoin online…the question is, are those unregistered exchanges or broker dealers operating in violation of the securities laws?”
Bitcoin Stock Trading
SatoshiDice first listed shares on MPEx in August of 2012. The inquiry letter not only seeks access to documents and contracts associated with Satoshi Dice, but also wants access to the account statements of Erik Voorhees, closely associated with the company being investigated.
In July 2013, Erik Vorhees released a statement online saying he had sold the company to a “private party”. Vorhees never identified to the online community who that private party was. After news broke of the SEC inquiry, Erik Vorhees declined to make a comment via e-mail. SatoshiDice did not answer such an email.
According to a Forbes report in January 2013, SatoshiDice is the Internet’s largest Bitoin wagering site, in terms of turnover. When Vorhees sold the site, he is thought to have received $12.4 million for the property. At the time of the Forbes report, the website had taken about $15 million in wagers.
The company may have senses potential trouble coming with the U.S. government. In May 2013, the Bitcoin site began blocking all American IP addresses, so U.S. gamblers could no longer play on its site. SatoshiDice’s servers are located in Ireland. MPEx is located in Romania.
Meaning of “Satoshi”
According to SatoshiDice, the term “satoshi” refers to 0.00000001 BTC. In some transaction, the loser of a wager is paid 1 satoshi.
Why Bitcoin Is Concerning
“Bitcoin” is an online currency which is not backed by gold, silver, or other precious metal. The currency is not issued like most government-backed currencies, but is instead traded according to its perceived value by the online community. One Bitcoin tends to be valued at around $200 US dollars ($194 at last look).
Because the currency isn’t issued with serial numbers by a mint somewhere, the currency is not easy for authorities to track and allows for a greater deal of anonymity than many money transactions. This makes the job of an agency like the Securities and Exchange Commission more difficult.
Other Bitcoin Legal Cases
Bitcoin transactions have become a target of government investigations in the past few years. In October 2013, the FBI shut down a Tor hidden service website, “Silk Road”, and arrested its alleged owner, Ross William Ubricht. While the anonyity of the Deep Web is what made that website so hard to track, the fact all transactions on Silk Road used the Bitcoin currency made the site (known as the “Amazon of Illicit Drugs”) even harder to bust.
For those unfamiliar with the Deep Web, “Tor” stands for “The Onion Server” and is a free software which allows for online anonymity. First developed by the U.S. military, the software gives online users access to the Deep Web.
