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SEC charges operator of Bitcoin-related websites

June 3, 2014, 7:15 PM UTC
This May 1, 2014 photo taken in Washington, DC shows a bitcoin medal. Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. AFP PHOTO / Karen BLEIER (Photo credit should read KAREN BLEIER/AFP/Getty Images)
Photograph by Karen Bleier — AFP/Getty Images

An operator of two websites that use Bitcoin has been charged with attempting to skirt federal securities regulations.

The U.S. Securities and Exchange Commission said Tuesday it has charged entrepreneur Erik Voorhees for selling shares in two Bitcoin-related websites, SatoshiDICE and FeedZeBirds, without registering those shares with the SEC. The government says Voorhees drew up prospectuses and sought out investors for the two websites, ultimately reaping more than $15,000 in investment funds in 2012 and 2013. Investors paid Voorhees using Bitcoin.

SatoshiDICE is a popular gambling site that uses Bitcoin currency, while FeedZeBirds is a site that pays Twitter users in Bitcoins to retweet sponsored ads.

The SEC says Voorhees has agreed to settle the charges by forfeiting the profits of $15,843.98 and also paying a $35,000 penalty.

“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 a statement. “We will continue to focus on enforcing our rules and regulations as they apply to digital currencies.”

Just last month, the SEC issued an “Investor Alert” warning about the potential for “frauds and high-risk investments” in Bitcoin-related investing. “Many fraudulent investment schemes involve unlicensed individuals or unregistered firms,” the SEC wrote at the time.