By Patricia Uceda, Fall 2014 Graduate Research Assistant
The SEC has sanctioned a computer programmer that was allegedly illegally operating online trading exchanges for securities based on virtual currencies such as Bitcoin without registering the venues. The programmer was also sanctioned for conducting unregistered offerings.
The programmer, Ethan Burnside, created a company (BTC Trading Corp.) which operated two online exchanges: BTC Virtual Stock Exchange and LTC Global Virtual Stock Exchange. These online trading venues provided account holders the ability to use online currencies to buy, sell, and trade securities. Most of the securities were from businesses that also operated in virtual currency.
Despite soliciting the public to create accounts and trade securities, the SEC alleges that venues were not registered as broker-dealers as required by the SEC. Additionally, according to the SEC, they were not registered as stock exchanges despite offering securities for the public to buy and sell. Lastly, the defendant allegedly also offered shares in the virtual stock exchanges themselves which were not registered with the SEC.
The SEC emphasizes that all securities activities must be properly registered, even if they are conducted online using solely virtual currency. The defendant is now barred from the securities industry and must pay disgorgement fees and penalty fees.