As detailed in the SEC’s press release, the SEC’s investigation found that the individual published prospectuses on the Internet and actively solicited investors to buy shares in two companies (SatoshiDICE and FeedZeBirds) using bitcoin. The fact that the investors paid for the shares using bitcoin may have been one reason why the SEC was attracted to the matter. The SEC has recently issued a number of alerts regarding bitcoin and this investigation underscores that the SEC will enforce its rules in the context of digital currencies.
According to the SEC’s order, the first unregistered offering sold 30,000 shares in FeedZeBirds, which promises to pay bitcoins to Twitter users who forward its sponsored text messages, in exchange for 2,600 bitcoins. In two separate offerings from August 2012 to February 2013, SatoshiDICE sold 13 million shares in exchange for 50,600 bitcoins that were worth approximately $722,659 at the time. SatoshiDICE, which calls itself the biggest bitcoin-betting game in the world and pays out casino-like winnings in bitcoins, ultimately returned these offering proceeds to investors in a buy-back transaction in July 2013. A significant rise in the exchange rate of U.S. dollars to bitcoins actually increased the amount paid back to investors to approximately $3.8 million for 45,500 bitcoins.