The Securities and Exchange Commission announced Monday that it reached a $68,000 settlement from the operator of a website that allowed users to market and trade unregistered Bitcoin-denominated securities for businesses involved in virtual currencies. The case, involving a now-defunct online exchange, is the latest development in the ongoing regulatory response to fast-growing digital currencies like Bitcoin.
“The registration rules are vitally important investor protection provisions, and no exemption applies simply because an entity is operating on the Internet or using a virtual currency in securities transactions,” said Andrew M. Calamari, director of the SEC’s New York Regional Office.
The SEC said that Ethan Burnside, a computer programmer, operated two businesses, known as BTC Virtual Stock Exchange and LTC-Global Virtual Stock Exchange, that functioned as stock exchanges without registering with the SEC.
Burnside’s settlement with the SEC covered the profits he made from the sites with interest and a penalty. He is also barred from the securities industry. The sites shut down in late 2013, after the SEC investigated them.
The BTC Virtual Stock Exchange carries a disclaimer that it is a “virtual stock exchange using virtual currency. Virtual goods utilized on this site are for entertainment and educational purposes only.”
The SEC said Burnside’s exchange for Litecoin transactions eventually gained 2,655 users with accounts and the one for Bitcoin had 7,959 users.
Litecoin and Bitcoin are peer-to-peer virtual currencies. The popularity of the technologies has grown in recent years, as has the interest of regulators worried about consumer and investor protections.
The SEC’s investigation of Burnside’s business was conducted by its New York regional office, along with its Digital Currency Working Group.
The investigation that led to Monday’s announced settlement was not the SEC’s first against a Bitcoin business. In June, the agency announced more than $50,000 in settlement payments from an entrepreneur who sold securities in Bitcoin-related ventures without registering them. And in July 2013 the SEC charged a man for a Ponzi scheme in Bitcoin-denominated assets worth millions of dollars at the time.
