Topic: a few questions about GLBSE - page 2. (Read 3894 times)

John, lets be realistic. Even in the wildest and wettest dreams nobody related to GLBSE can talk about $80 million USD. The current situation is that even if they deal cash they would have sneaked through under the provisions of Omnibus Paperwork Reduction Act. The sums are so low, so few people involved, the promotion activities so marginal, that they could successfully defend themselves as an entertainment venue dealing with game tokens.

I'm fully with you on the issue that many people here on this forum have an intent to deceive, defraud or otherwise disobey the law. GLBSE is one of the best examples. But the people who raised bitcoins (not legal tender money) in exchange for unregistered securities are not going to get prosecuted for felony. Their best defense will be just to return the bitcoin investments as promised.

So lets keep a clear distinction between the GLBSE stakeholders like Nefario on one side and small time gamblers that use GLBSE sevices on the other side. Mens rea still has an important legal meaning in the USA.

It's not hard to understand.

The investment-club exemption doesn't apply here; that requires a real voting membership organization set up as a formal partnership. Some people here may be accredited investors, with net worth over $1 million, but an offering made to anyone doesn't qualify for that exemption. There's also a short form SEC registration for small offerings, but that requires a filing with the SEC.

People have tried to come up with scams that don't fit the definition of "investment" and "security". In SEC vs. Howey, the Supreme Court basically said that if something not listed in the Act acts like an investment, it is.

It's worth looking into the AdSurfDaily case. The guy behind that acted like his scheme wasn't subject to regulation. He made noises about "sovereign citizens".  Didn't work.  $80 million in forfeitures pried the money out of the scam and DoJ has a claim program to give it back to the investors.  The people behind the scheme have been indicted and are going to trial soon.

GLBSE sets itself up like a stock exchange, and encourages people to buy and sell their stocks. Arguing that those aren't securities is not going to fly.  Sorry, guys.

John is posing important questions. The relevant legislation was ammended so many times that it is hard to understand.

Two quick exceptions off the top of my head:

http://www.sec.gov/investor/pubs/invclub.htm

http://www.sec.gov/answers/accred.htm

There is quite a number of cases that were judged in favor of defendants. But the primary advice was, if I remember correctly, "Don't try to defend yourself pro-se, hire a lawyer".

They thought of that back in 1934:

A security is "any note, stock, treasury stock, security future, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a 'security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or bankers' acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited." - Section 3a item 10 of the 1934 Act.

There's no mention of "money" being required. Courts have since ruled that new financial gimmicks invented after 1934 should be considered securities if they look or work like anything in that list. Bowdoin, the AdSurfDaily guy, made the argument that a share in an web ad-rotator wasn't a security. The court didn't buy it.

It's the offering of securities to Americans that triggers SEC jurisdiction. The offeror has to comply with US law to do that. Many of the GLBSE listed "companies" are in the United States.

GLBSE itself is hosted in Portugal, not China. Portugal is part of the European Union, and so the common European regulations on securities, enforced by the European Securities and Markets Authority, apply.

For US persons and companies, raising money on GLBSE is a felony under the Securities Act of 1934. To create a publicly traded investment, you have to register with the Securities and Exchange Commission first, and file forms like SEC Form 1-A.

This form starts with:

ITEM 1.
Significant Parties
List the full names and business and residential addresses, as applicable, for the following persons:
(a) the issuer’s directors;
(b) the issuer’s officers;
(c) the issuer’s general partners;
(d) record owners of 5 percent or more of any class of the issuer’s equity securities;
(e) beneficial owners of 5 percent or more of any class of the issuer’s equity securities;
(f) promoters of the issuer;
(g) affiliates of the issuer;
(h) counsel to the issuer with respect to the proposed offering;
(i) each underwriter with respect to the proposed offering;
(j) the underwriter’s directors;
(k) the underwriter’s officers;
(l) the underwriter’s general partners; and
(m) counsel to the underwriter.

You don't get to issue securities anonymously in the US. The usual penalty is 5 years in prison.

Here's a typical FBI report of a conviction for selling unregistered securities.. One of those people gets out of the Federal pen in 2015.

Operating entirely on line won't help. An online unregistered securities operator who ran AdSurfDaily is was arrested and is facing felony criminal charges. If you're wondering what the legal definition of a "security" is, see this court decision against the operator of AdSurfDaily. The terms for AdSurfDaily sound a lot like the ones for many GBLSE investments. Here's what AdSurfDaily advertised:

   Rebate Distribution: Ad purchase sales and banner ad sales on the Cash Generator and the sale of ebooks will be totaled at midnight each night and 50% of the gross sales will be rebated to add purchasers. Fifty percent of the commissions that the Cash Generator earns from their sister site, “Attract Marketing System,” will also be paid as rebates to ad purchasers on the Cash Generator.

Every night at midnight the number of eligible ad packages will be totaled and divided into the total ad package sales, banner ad sales and ebook sales to determine the amount of the rebate for each ad package. That amount will be multiplied by the number of ad packages in each advertiser’s account and the total will be credited to his/her cash balance account. Rebates will show up in your account after midnight EST.

Sounds like a lot of GBLSE offerings, doesn't it? That was held to be an "investment contract" requiring SEC registration in UNITED STATES OF AMERICA v.THOMAS ANDERSON BOWDOIN, JR., Defendant, Criminal Action No. 10-320 (RMC), United States District Court, District of Columbia, March 18, 2011. Mr. Bowdoin is looking at 125 years in prison, max.

How much it costs to create a stock packet of my website business ?

How is dividend paid in case of 1 million shares and 0.73 BTC total revenue ?
regarding the transfer fees

Can my shares be traded outside of GLBSE environment, like certificates, or just hashes of numbers ?

Can I own all shares and not list them for sale at all ?

Can I give 1 share to someone, not sell, but give ?

Can I back my shares with bitcoin and how ?