It seems highly unlikely to me that he's been told to close down by the SEC or any LE. Were that to have happened then closure would have been more of a case of pulling the plug out than the gradual winding down that has been announced. This feels far more like being told to stop by his own lawyers than a cease-and-desist or seizure by some government agency - they don't give you a month to sort things out in, they want immediate cessation of activity.
This sounds spot on. If it was the SEC they wouldn't allow an illegal exchange to continue operating for another month.
Deprived I have a question if you would be kind enough to answer.
What process would have Burnside had to go through to make the exchange legal?
Because exchanges
are able to run in the USA. So I am sure there must be a path to create a legal compliant exchange.
Do you have any idea?
Well I'd say that, pretty obviously, his lawyers have told him there's NO practical way it can be turned into something legal. That doesn't mean it's impossible to run a legal exchange - just that it's not possible to turn BTC-TC into one. I don't think there's one simple reason why that's the case - it's a mix of a few things. None of the things on their own are a problem - but put them all together and as soon as he hired a lawyer it was pretty obvious that at a minimum US investors (and probably issuers) would be getting the boot.
1. There was no restriction on who could use the exchange. Neither in terms of a membership fee/referral system (making it private) or in terms of restricting access to those meeting certain criteria (such as $X in cash).
2. There was no AML/KYC process.
3. Despite the site claiming everything was virtual, many securities explicitly refer to USD in their contracts - including some with dividends and/or face values defined in fiat rather than BTC.
4. Some securities relate to real businesses/companies.
5. The site makes contradictory claims (and actions) in terms of due diligence conducted by the operator.
The problem with trying to continue would largely be that MASSIVE work would be needed on some securities - and others would end up having to be delisted. But if BTC-TC were to try to become 'legitimate' then it would no longer be able to claim protection against any losses incurred as a result of actions its operator took. Continuing would gut the site (in terms of securities - and possibly of investors) and expose burnside not just to liability going forward but also liability for actions he'd taken in the past. Which is another reason he won't be able to comment much about the legal advice he received - doing so could increase his liability.
I believe he was naive believing the "it's a game" thing would work - but genuinely did his best to try to make it happen until he spoke to lawyers who likely just laughed at the idea. I'm sure he'd LIKE to explain everything in detail but can't as it would be very risky for him to do so.
Let's be clear about one thing here. ALL of us who used the sites knew (or should have known) that the sites were, at best, in a bit of a grey area. Trying to lump all the blame for that on burnside is totally unfair. If he was naive then so was everyone else who acts all surprised now. I'm not surprised nor do I blame him for what losses I'll make - that's the result of MY decision to 'gamble' NOT his decision to allow me to 'gamble'. I'm mainly grateful that he's shutting down in an orderly fashion rather than the cluster-fuck/theft that occurred when GLBSE ended.
