SEC Knocks on MPEx's Door, Popescu Doesn't Budge

The operator of MPEx, Mircea Popescu, was e-mailed by Daphna Waxman, attorney for the Enforcement Division of the Securities and Exchange Commission. She was requesting some correspondence with Popescu on the matter of the sale of SatoshiDice, a site that provides gambling based on the Bitcoin protocol.

The SEC is reportedly investigating the listing on SatoshiDice "shares" on MPEx, which reportedly occurred in August 2012. Andrew Ceresney, the SEC’s enforcement director, previously said the SEC was “very focused” on determining whether Bitcoin-denominated stock exchanges are illegal, as securities-trading platforms are required to be licensed by law.

The obvious anomaly: that the SEC would consider a business not under their jurisdiction, but sold via a medium somebody decides to call an exchange, as a security for its purposes.

MPEx is a platform used for trading and providing information on bitcoin-related securities, similar to Havelock Investments. On the top of its homepage, it indicates that it is "Providing nucleation in the superheated fluid of Bitcoin. Since 2011."

The exchange starts with Waxman requesting correspondence with Popescu, who gives her more than a hard time. She then requests the voluntary submission of: "(1) a list of all SatoshiDICE shareholders prior to the sale of the company in July 2013(preferably by name, address, or BTC address); and (2) an account history for Mr. Erik Voorhees showing the sale of shares, payment of dividends etc." Popescu rejects her credentials for obtaining such information from them. Lengthy at times, his rebuttal reaches a peak with the following:

"Should you understand you have no authority in the matter but nevertheless wish to pursue some sort of amicable understanding, you will first have to appreciate the difference between legal and illegal requests. In this sense, asking someone to pick up your daughter from school is a legal request (as far as I know of the rapidly deteriorating legal environment in the US, at any rate). Asking them to pick up your daughter and throw her over a cliff however is an illegal request. The difference between these is, broadly speaking, that the party satisfying the first type of request exposes themselves to no liability, whereas the party satisfying the second type of request does expose themselves, perhaps to significant liability, both civil and criminal."

One can tell that the nature of this correspondence is out of sorts for something coming from a federal agency like the SEC. The awkwardly tentative approach, and the fact that not only was Popescu contacted by e-mail, but that such a drawn out (and unproductive) exchange ensued and eventually publicized over the web, is indeed difficult to explain.

The investigation highlights a growing trend of SEC getting sucked into Bitcoin-related matters, something it would not have foreseen during the early days of Bitcoin. The SEC now also needs to contend with the advent of Bitcoin-related funds, which if approved, could open the floodgates toward similar offerings.

The obvious anomaly: that the SEC would consider a business not under their jurisdiction, but sold via a medium somebody decides to call an exchange, as a security for its purposes.

"Should you understand you have no authority in the matter but nevertheless wish to pursue some sort of amicable understanding, you will first have to appreciate the difference between legal and illegal requests. In this sense, asking someone to pick up your daughter from school is a legal request (as far as I know of the rapidly deteriorating legal environment in the US, at any rate). Asking them to pick up your daughter and throw her over a cliff however is an illegal request. The difference between these is, broadly speaking, that the party satisfying the first type of request exposes themselves to no liability, whereas the party satisfying the second type of request does expose themselves, perhaps to significant liability, both civil and criminal."