The US Securities and Exchange Commission (SEC) is investigating bitcoin securities exchange MPEx and gambling site SatoshiDice, according to an email exchange posted online yesterday.
The news could have implications for other bitcoin equity exchanges and the people investing with them, especially if they are US residents. Dealing only in bitcoin, the platforms function otherwise as unregulated stock exchanges and usually do not require any identification from users.
A SEC representative sent an email request to MPEx operator Mircea Popescu of Romania. Popescu, known as 'MP' to the bitcoin community, is widely known for his outspokenness and offered a lengthy defence of bitcoin in his responses to the SEC's request.
He was contacted by Daphna Waxman, an attorney with the Enforcement Division of the United States Securities and Exchange Commission, on 14th February with a request to release a list of all investors in SatoshiDice before its sale in July last year, and an account history for Erik Voorhees, the site's original owner.
It is not clear if MPEx has broken any rules or even whether the US SEC has any official jurisdiction over a company based in Romania, as Popescu pointed out in the conversation. However it can certainly apply extrajudicial pressure, and Waxman requested he "voluntarily provide" the information instead. After denying Waxman a telephone conversation he wrote:
"As you’re soliciting private information you will have to sufficiently establish your authority to do so, which includes defeating specific challenges of jurisdiction that on a cursory examination seem to bar the institution you claim to be associated with from making these specific requests."
The SEC has concerned itself for some time over whether bitcoin-denominated stock exchanges are illegal, according to a Bloomberg report.
On reddit, users expressed concern that other bitcoin exchanges such as Havelock Investments, their customers, and high-profile bitcoin personalities might be on the US authorities' radar as well. Waxman requested Popescu identify SatoshiDice's pre-July 2013 shareholders by "name, address, or BTC address".
SatoshiDice, which Voorhees founded and sold for 126,315 BTC ($11.5m at the time) to an undisclosed party in July last year, is not currently listed on MPEx or any other exchange.
The simple bitcoin betting game of chance has proven wildly popular, even though online gambling is illegal for US residents – at least when it involves what the authorities call 'real' currency.
Dice image via Shutterstock