For anyone interested in the MSD investigation this is essential reading:
http://www.sos.mo.gov/securities/orders/AP-09-09.aspI'd advise anyone to have a go reading through it slowly, it has some similarities to our case.
Some main points:
-Like the previously mentioned case it took 12months from the opening of the investigation until a ruling was made.
-Involves a CEO of a startup selling unregistered securities/shares to investors in MO.
-The ruling is that CEO is prohibited from issuing shares/must cease the share issue and pays a fine of $10k (max fine 'per violation') for breaching the MO securities law.
-States that the costs of the investigation will/may be charged to the defendant, depending on his excuses/explanations.
Apart from the issuing of unregistered shares the defendant is also found to have helped an agent and/or to have acted as an agent in the selling of unregistered securities in MO. There is also an additional finding that the CEO misled the investors by saying when he sold the shares that there was 'no risk involved'. I'm not sure if these would also entail a $10k fine per breach?
Two people who bought the shares have created the MSD complaint and the reason seems to be that they have had no return from their investment. One has asked for his investment money back (as had been promised as an option) but has not been given the money back. The CEO says the company is in financial difficulty. The MSD are not involving themselves in the issue of the return of the money and don't seem to be investigating whether this is a sham company or not - they are just solely looking at the Securities Laws that have been breached.
This lets us see the sort of issues the MSD will be looking at. IF they find 'securities have been issued' (grey area as we know) then our CEO is looking at a $10k fine (possibly for each breach that they find I'm not sure) plus covering the costs of the investigation. Ken would also (if the MSD think securities have been issued to residents of MO) be barred from issuing unregistered shares. So he would need to register them in the future or use a non regulated solution (such as Coloured Coins) if the MSD was happy with that solution.
I would say that the MSD seem to be a very thorough and professional outfit and also a fair one. They see a lot of cases through the year and they clearly make business-like cut and dry rulings on breeches of regulation. I'm confident they will rule sensibly in this case BUT having said that we may be the first crypto-currency/alt-security case they have seen. So I'm sure they will be finding this a very interesting case and may need to consult widely on it. My personal judgement would be that firstly these shares were offered world-wide not to MO residents in particular and second that they are not 'sold securities' in the traditional sense but crowd-funding in a digital currency. Crowd funding is OK in the US now right?
Whatever happens this shouldn't kill the company but it could lead to a very large fine and loss of money which we can't afford to lose out of the business. That could very easily mean the company looses it's place in the ever expanding mining market and we have to close due to lack of reinvestment funds. That would be tragic. Hundreds of investors WOULD then lose everything. So I really hope that the MSD take into account the effects a fine would have on a business in breach before deciding on the level that fine should be.
Any comments? Sorry for length of post.
