Topic: Legality of IPOing securities on GLBSE (Read 10100 times)

504 means you don't have to provide a full prospectus/product disclosure statement if you meet the exemption requirements.  505 requires you to know the identity of your investors and determine whether or not they're accredited (you can't determine that without knowing their financial resources) and you are not allowed to advertise in order to attract investors.


Are you going to pay his legal fees for defending against the charges?  Are you happy for all funds held by GBLSE to be frozen pending the matter going to trial?  Are you going to visit him in prison or pay his fines if he's not acquitted.

Everyone around here is very brave when it's not their freedom on the line or when they're not the ones who'd have to pay the fines and be banned from operating another business.

A sympathetic judge might agree.

I feel a need to post today.  I don't know the history of FSA/UK...

The SEC has a broad authority to regulate any financial related contract in the US.  I was very specific, I did not mention currency, so don't confuse the two.  On it's own bitcoin is fine...it's when folks decided to use contracts that outline stocks, bonds, exchange of securities, dealing in securities, etc that things went wonky in bitcoin.  Banks, lending & deposits are usually covered by other regulators.  Agree or disagree with me, but I am not the one who is going to decide to call you in.  If you don't know, go ask a securities lawyer instead of asking the question here...

Anyone who thinks they are investing when they buy a "security" in the bitcoin world on an un-audit-able unlicensed exchange lacking the benefit of a co-op/third-party holder of the securities didn't pay attention to the history of the US financial regulations.  Do you know why exchanges are regulated?  Do you know why you can't directly interact with the exchange without a license?  Why brokers are licensed?  Do you know why FINRA is an insurance co-op & industry self-regulator?  Why do companies use auditors?  Why do companies pay to get their credit rated? (yea the credit part not perfect...but you get the point...there is a reason for all this)  Do you know why these firms have compliance officers?

FRAUD, and the rules to prevent it

Money makes fools of the greedy, and tempts the corrupt into thinking they are above the rules...

Even the US rules don't change fast enough to protect a dynamic system, and ever more interconnected system...someone always seems to outsmart the system and bring it down just a bit.  So, after the mess, the rules get changed...

I would say anyone who thinks that any of these things could be sold or issued to a US entity without following the rules is pretty much risking every single US real-world right he/she has - so don't do it in the US, and if you did don't come to the US or any place extradition to the US is possible.  Well, I hope that scared you, but realistically, this mess is too small to nab everyone.

There is a bigger picture here...1) the bitcoin economy is really very thin 2) without the rules Fraud the amount of will exist in vast vast numbers. 3) uninformed, uneducated CEO's can cause a good idea, to become an insolvent nightmare very fast 4) unlicensed, unregulated business will leave without a trace

I think the best analogy is an California gold rush...mining makes the money, and other people figure ways to part the gold from you.  You can disagree, but right now, the only other useful purpose is Intl Exchange...which is subject to rules and regulations, and can disappear at any time.  Maybe one day, other enterprises will replace mining...but that is to be determined.  Just keep this in mind, bitcoin is an ideal...it is not yet an economy, in some ways it's still looking for a purpose.  It's only wishful thinking to label a forum economy.

At a minimum, without AML/KYC info, you are subject to any US LEO's whim.  The rest is up to the SEC's final workout plan...(if any)

If 50 people get together and buy a mining rig and never resell the shares its got nothing to do with the SEC because its a private entity at that point and theres actual hardware involved. I guess those 50 people could get together and buy a gold bar in the same way.

I wonder if the mining bonds and some mining-related assets would be not classified as securities.

 - http://cuttingedgecapital.com/diamonds-gold-and-capital-raising-how-to-fall-outside-the-securities-laws-in-california/


Isn't that what those "bonds" are?    Aren't those "shares" really just contracts to run electrons through computing hardware? 

Except on Tuesdays... When it's dark, you can give up to... and then Spock gives you a Vulcan nerve pinch.
Boy do we need Bitcoin.

^ relevant comment from D&T in another thread:

Found on the Internet:

Well, you're absolutely right for the most part, and that's also why online MMORGs don't receive more attention. But keep in mind that people working in these bureaucracies want to show that they're relevant and on the cutting edge of whatever they do - going after new tech can be one way to do that. Also, this comes after Pirate's ponzi has collapsed, and the allegations about how much money was lost in that scam - half a million USD - are for an amount large enough to warrant an official investigation. There is another incentive too: testing the waters. Pirate involved enough money to make some sort of investigation worthwhile, and the people doing that investigation may very well figure it'd be worth going all the way to get some practice before an even bigger scam comes along. It'd also be quite conceivable to give the investigation to a new, junior, officer to both give them some experience, and evaluate their performance before something important comes along.

Heck, I once probably experienced this myself while waiting in the international departure lounge in a country for which I had citizenship for, waiting for a direct flight to a different country for which I also had citizenship for. I was stopped by two officers for what they said was a random customs interview. One officer looked to be in his 50's or 60's, and his name tag said something along the lines of "senior" or whatever, and the other one looked like he was 18 or so. I gave them both my passports and my ticket, obviously showing that neither country could prevent me from entering, and the younger officer proceeded to grill me for the next ten or fifteen minutes about my trip in the exact same way you get entering a country when they're not sure if they're going to let you in.

After that was over, I overheard the older officer discussing his interviewing technique with the younger one...

Most of the GLBSE businesses were worth at most a few thousand bucks. It isn't worth the time of anyone to prosecute anything. Boys-night-out poker games move more money than most GLBSE IPOs.  Money laundering? What money? Sorry, I don't believe this is a legitimate threat. We'll have to wait until Nefario tells us what is happening. In the meantime, the next generations of decentralized exchanges will evolve and that will be the end of threats from government bullies.

Because they're advertised as games, and the developers running them don't officially support full convertibility of the in-game credits  to and from fiat. Even then lawyers are looking into the extent to which securities laws and anti-money-laundering laws apply to virtual games, for instance "AML Magazine - Only in the Virtual World" http://www.amlmagazine.com.au/amlwr/_assets/main/lib90004/only%20in%20the%20virtual%20world_issue%2031_dec11.pdf

You know, you can break securities laws and anti-money-laundering laws by trading in commodities or other valuable items too. For instance it's been suspected that many of the sky-high prices seen in the international fine-art market, and the plethora of anonymous buyers, are actually due to the ability to store and transfer wealth through art, or even straight-up money laundering schemes.

No court is going to believe Bitcoins aren't valuable if them being valuable serves the purposes of a securities fraud investigation.

IANAL, but I don't get the problem here. Nefario is not dealing with any country's legally defined currency. How is GLBSE any different than FB games or MMORPGs? It seems to me he is just being hassled by schmucks that don't like games without fairies and epeens. I don't see them shutting down Eve or WoW for all the scams they have. Sure, he may be indicted, but he may also be acquitted, amirite?

Not really relevant. The accusations were not made in the context of planning legal action, but in the context of determining community action.

Those accusing Nefario in breach of "GLBSE bylaws" perhaps should also get familiar with this contract law concept http://en.wikipedia.org/wiki/Illegal_agreement

This thread has taken some interesting twists and turns, but it seems we can now end this thread exactly where we probably should have seen coming from the very beginning:


Unfortunately I did not have the foresight to completely protect myself from these kinds of risks, and now, like many others around here, I will be suffering at least a short-term or probably permanent loss on our investments at GLBSE.

Prescient:

So in the absence of a formal agreement there wouldn't be a default classification for these?   This surely is something that has been seen. This wouldn't be the first time multiple people unknown to the entrepreneur have put money in towards a venture, without any formal legal structure being formed first.

Not likely. There would probably need to be a partnership agreement formalizing the partnership, rights, duties, responsibilities, etc.

If anything the GLBSE issues are creating personal debts for the issuers which would be tied to the identity of the documents submitted. Of course, if there is identity theft then the victim would not be liable.

With a "company" on GLBSE being unincorporated, do those buying "shares" of the asset become partners then?

Partners are jointly and severally liable for debts, right?  So let's say I buy a share of a mining asset (not a bond, let's say, but described instead as owning a share of the mining operation), and the mining operator did a bad job with the electrical wiring, someone gets injured and sues successfully.   Am I now liable for that debt?  (I'm not talking limited up to the $5 that the share was worth, I'm referring to actually getting named in a suit having to defend myself as a partner in this mining operation.)

Is this one of the possible outcomes?

Its hard to know the truth in that case. Hard to prove whether the coins were stolen or simply withdrawn by the account owner. No way to tell really.