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- UNITED STATES OF AMERICA
- Before the
- SECURITIES AND EXCHANGE COMMISSION
- SECURITIES ACT OF 1933
- Release No.
- 9592 / June 3, 2014
- ADMINISTRATIVE PROCEEDING
- File No.
- 3
- -
- 15902
- In the
- Matter of
- Erik T. Voorhees,
- Respondent.
- ORDER INSTITUTING CEASE
- -
- AND
- -
- DESIST
- PROCEEDINGS
- PURSUANT TO
- SECTION
- 8A OF THE SECURITIES ACT OF 1933,
- MAKING FINDINGS, AND IMPOSING A
- CEASE
- -
- AND
- -
- DESIST ORDER
- I.
- The Securities and Exchange Commission (“Commission”) deems it appropriate that public
- cease
- -
- and
- -
- desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities
- Act of 1933 (“Securities Act”) against
- Erik T. Voorhees
- (“Respondent
- ”).
- II.
- In anticipation of the institution of these proceedings, Respondent has submitted an Offer
- of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
- purpose of these proceedings and any other proceedings brough
- t by or on behalf of the
- Commission, or to which the Commission is a party, and without admitting or denying the findings
- herein, except as to the Commission’s jurisdiction over him and the subject matter of these
- proceedings
- ,
- which are admitted, Responden
- t consents to the entry of this Order Instituting Cease
- -
- and
- -
- Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings,
- and Imposing a Cease
- -
- and
- -
- Desist Order (“Order”), as set forth below.
- 2
- III.
- On the basis of this Orde
- r and Respondent’s Offer, the Commission finds that
- :
- Summary
- These proceedings arise out of
- unregistered offerings
- of shares of
- FeedZeBirds and
- SatoshiDICE,
- two
- separate
- entities
- co
- -
- owned
- by Voorhees and
- others.
- Voorhees is
- a well
- -
- known
- Bitcoin
- proponent,
- and
- t
- he
- shares were
- offered and sold in exchange for bitcoins
- , commonly
- referred to as
- “virtual currency
- .
- ”
- 1
- Bitcoin
- is a
- decentralized
- pee
- r
- -
- to
- -
- peer payment
- network
- ; bitcoin
- t
- ransactions are
- recorded
- by the network
- o
- n a
- n electronic
- public ledge
- r
- known as the “block chain.”
- Bitcoins
- can be used to purchase real
- -
- world goods and services and
- can be exchanged for fiat
- currencies on certain
- online
- exchanges. From May 201
- 2
- , the time of the first offering, to the
- present, the exchange rate
- of
- U.S. dollars (“USD”)
- to b
- itcoin
- s
- has fluctuated between
- a low of
- approximately
- $5 per bitcoin and
- a high of
- approximately
- $1,20
- 0
- per bitcoin.
- In May 201
- 2
- ,
- FeedZeBirds
- offered and sold 30,000 shares
- ,
- and
- raised 2,600 bitcoin
- s
- in
- connection with
- that
- unregi
- stered offer and sale
- .
- At the time of the
- FeedZeBirds
- offering, the USD
- value of the
- bitcoin
- s
- raised was
- approximately
- $15,000
- .
- From August 2012 through February
- 2013,
- in two separate offerings,
- SatoshiDICE
- offered and sold 13
- million
- shares
- ,
- and raised
- 50,600
- bitcoin
- s in
- connection with
- those
- unregistered offers and sales
- .
- At the time of the
- SatoshiDICE
- offerings, the USD value of the total
- bitcoin
- s
- raised was
- approximately
- $
- 7
- 22,659
- .
- In July 2013,
- SatoshiDICE
- bought back all outstanding SatoshiDICE sha
- res from investors at a price of 0.0035
- bitcoins per share
- ,
- for a total of 45,500 bitcoins
- .
- D
- ue to the significant rise in the exchange rate of
- b
- itcoin, the total USD amount paid to investors in the SatoshiDICE buy
- -
- back transaction
- (approximately $3.8 mil
- lion) exceeded the total USD amount raised.
- Respondent
- and Relevant Entities
- 1.
- Voorhees
- , age 29
- ,
- is a U.S. citizen
- who, a
- t the time of the
- FeedZeBirds
- and
- SatoshiDICE offerings, was living in
- the United States
- .
- 2.
- FeedZeBirds
- is not a registered
- corporation
- .
- FeedZeBirds
- purports to pay
- individuals who use Twitter, an online text messaging service
- , a
- fee in bitcoin
- s
- in exchange
- for
- 1
- For purposes of this Order, a “virtual currency” is a digital representation of value that can be
- digitally traded and functions as a medium of exchange; a unit of account; and/or a store of
- value, but does not have legal tender status (i.e., when tender
- ed to a creditor, is a valid and legal
- offer of payment) in any jurisdiction. It is not issued or guaranteed by any jurisdiction, and
- fulfills the above functions only by agreement within the community of users of the virtual
- currency. Virtual currency i
- s distinct from fiat currency, which is the coin and paper money of a
- country that is designated as its legal tender; circulates; and is customarily used and accepted as a
- medium of exchange in the issuing country. It also is distinct from e
- -
- money, which
- is a digital
- representation of fiat currency used to electronically transfer value denominated in fiat currency,
- i.e., e
- -
- money electronically transfers value that has legal tender status.
- 3
- forwarding sponsored text messages.
- During the relevant time period,
- Voorhees
- co
- -
- own
- ed
- FeedZeBirds
- , which had a
- webs
- ite (feedzebirds.com)
- that launched
- in November 2011.
- 3.
- SatoshiDICE
- is not a registered
- corporation
- . SatoshiDICE purports to be a
- gambling
- website that takes
- bets
- and pays
- out winnings in bitcoin
- s
- .
- Voorhees launched
- the
- SatoshiDICE website (satoshidice.
- com)
- in April 2012
- ,
- and
- co
- -
- owned the company until July 2013,
- when he and
- the other co
- -
- owners
- sold it.
- Offering of FeedZeBirds Shares
- 4.
- On May 24, 201
- 2
- ,
- FeedZeBirds
- offered 30,000 shares
- ,
- representing 30% of the
- company
- ,
- priced at
- 0.08667 bitcoin
- s
- per share.
- 2
- The share
- s
- were listed
- on
- an entity known as
- the
- Global Bitcoin Stock Exchange
- (“GLBSE”)
- ,
- which purported to run
- a
- B
- itcoin stock exchange
- .
- 3
- 5.
- Voorhees
- published
- a
- prospectus for the
- FeedZeBirds
- offering, which
- he made
- publicly
- available on t
- he Internet. The prospe
- ctus
- w
- as
- never filed with the Commission. In
- addition, Voorhees made general solicitations
- to sell
- FeedZeBirds
- shares
- over the Internet, which
- included posts on
- an internet website dedicated to Bitcoin known as the
- Bitcoin Forum
- (bitcointalk.org)
- ,
- on
- Facebook.com, and
- on
- other
- B
- itcoin
- -
- related websites.
- 6.
- For example, p
- rior to the offering, o
- n May 21, 2012, Voorhees posted on the
- Bitcoin Forum the following:
- “FeedZeBirds.com (
- http://FeedZeBirds.com
- ), the Bitcoin Twitter
- advertisin
- g platform with nearly 3,000 users and over 40,000,000 ad impressions served thus far, is
- launching shares on
- Thursday, May
- 24, at 15:30 EST via GLBSE.com
- .”
- (
- Emphasis
- removed
- from
- original
- .)
- 7.
- Also o
- n May
- 21, 2012
- ,
- the website FreedomsPhoeni
- x
- .com posted the following
- announcement
- titled
- “
- FeedZeBirds IPO
- ”
- :
- FeedZeBirds is proud to announce that you can now own a piece of feedzebirds.com. On
- Thursday, May 24, at 15:30 EST FeedZeBirds will release 30% of the company as 30,000
- shares on GLBS
- E, t
- he Bitcoin stock exchange ....
- A share will be sold at 0.08667 BTC
- each.
- ”
- 8.
- The FeedZeBirds offering
- raised 2,600 bitcoin
- s
- . At the time of the offering, 2,600
- bit
- coin
- s
- w
- ere
- worth approximately $15
- ,000.
- 2
- One bitcoin is divisible into 100,000,000 units,
- with the smallest
- unit (0.0000001 bitcoin)
- called
- a
- “Satoshi.”
- 3
- In October 2012, GLBSE ceased operations.
- 4
- Offering
- s
- of SatoshiDICE Shares
- 9.
- In a first
- SatoshiDICE
- offering, which took place f
- rom August 2012 through
- January 2013,
- SatoshiDICE
- offered and sold 10 million shares, which represented a 10% interest
- in the company.
- SatoshiDICE
- offered the
- se
- shares in three separate tranches
- at prices between
- 0.
- 0032
- and
- 0.0037 bitcoins per share. The shares of SatoshiDICE were listed on MPEx, a
- purported Bitcoin trading platform based in Romania.
- 10.
- Voorhees
- published
- a
- prospectus
- for th
- is
- first SatoshiDICE offering
- , which
- he
- made
- widely available on the Internet.
- According to
- a summary
- prospectus, SatoshiDICE sought
- to “raise IPO capital through an equity offering on the MPEx platform by releasing 10% of its
- 100,000,000 shares. Starting from the first full calendar
- month
- after the IPO, shares will pay
- dividends
- equal to 100% of SatoshiDICE net profits ....”
- The
- prospectus was never filed with the
- Commission.
- 11.
- In addition, Voorhees made general solicitations over the Internet, which included
- posts on the Bitcoin Forum,
- on
- Facebook.com,
- and
- on
- other
- B
- itcoin
- -
- related websites.
- 12.
- According to the prospectus
- and statements made by Voorhees, 10% of the funds
- raised in the offering would be used on a “high profile print marketing campaign in European
- gaming publications.”
- Voorhees also posted
- on the Bitcoin Forum
- t
- hat
- he
- planned to
- use
- the
- remaining
- proceeds
- to fund two undisclosed startups.
- Finally, t
- he
- prospectus
- included
- statistics
- about SatoshiDICE’s
- earnings and expenses
- .
- 13.
- T
- he first SatoshiDICE o
- ffering
- raised 34,500 bitcoin
- s
- . At the time of the offering,
- 34,500 bitcoin
- s
- were
- worth
- approximately
- $
- 371
- ,
- 910
- .
- 14.
- In a second
- SatoshiDICE
- offering, which took place i
- n February 2013,
- SatoshiDICE
- offered and sold an additional 3
- million
- of its
- shares
- at price
- s
- between 0.0044 and
- 0.0062 bitcoin
- s
- per share
- , which
- raised 16,100 bitcoin
- s
- . At the time of th
- is second
- offering, 16,100
- bit
- coin
- s were
- worth
- approximately
- $
- 337,827
- .
- 15.
- On
- July
- 17,
- 2013,
- Voorhees announced on the Bitcoin Forum that SatoshiDICE
- was being sold and that in anticipation of the sale, SatoshiDICE
- would buy back all outstanding
- shares from investors. Voorhees posted that SatoshiDICE would buy the shares at 0.0035 bitcoins
- per share, which was at a 277% premium over the per share price that SatoshiDICE received in the
- sale of the company and roughl
- y a 175% premium over the current market price of the
- SatoshiDICE shares listed on MPEx.
- 16.
- Just prior to the sale
- ,
- SatoshiDICE
- bought back
- all
- 13
- million
- outstanding
- SatoshiDICE shares from investor
- s
- at a price of
- 0.0035 bitcoin
- s
- per share
- ,
- for a total of 4
- 5,500
- bitcoin
- s
- .
- D
- ue to the significant rise in t
- he
- exchange rate
- of
- b
- itcoin, the
- total
- USD
- amount paid to
- investors
- in the buy
- -
- back transaction
- (approximately $3.8 million)
- exceeded the total
- USD
- amount
- raised
- (
- approximately
- $722,659)
- .
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