Regulators may not have settled on exactly how they want to deal with digital currencies like Bitcoin, but the rules governing the rest of the financial system still apply. The Securities and Exchange Commission charged Erik T. Voorhees, the owner of two bitcoin-related websites, of offering shares in his companies without registering them first. He has settled the SEC charges by paying full disgorgement of the profits, a bit more than $15,000, and a $35,000 fine.

SEC Fines Entrepreneur For Unregistered Bitcoin IPOs

“All issuers selling securities to the public must comply with the registration provisions of the securities laws, including issuers who seek to raise funds using Bitcoin,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement in a press release.  “We will continue to focus on enforcing our rules and regulations as they apply to digital currencies.”

SatoshiDICE investors benefited from bitcoin appreciation

To be clear, Voorhees isn’t accused of defrauding or otherwise taking advantage of his investors, at least some of whom turned a healthy profit. The bitcoin gambling site SatoshiDICE raised 50,600 bitcoins in two separate offerings in August 2012 and February 2013, valued around $720,000 at the time. Then the company bought back many of the shares, returning 45,500 bitcoins to investors which were then worth $3.8 million because of bitcoins rapid valuation against the dollar.

The other company, FeedZeBirds, is an advertising company that makes bitcoin payments to  Twitter Inc (NYSE:TWTR) users who retweet sponsored messages. It raised 2,600 bitcoins during the ‘FeedZeBirds IPO’ held in May 2012.

The IPOs show disconnect between bitcoin community, financial sector

Voorhees openly advertised these offerings on the popular Bitcoin Forum, so the SEC probably didn’t have much trouble proving its case once the offerings were brought to its attention, but this case shows the disconnect that has existed between the bitcoin community and the traditional financial world. Part of the promise that convinced the crypto community and libertarians to back the digital currency when very few people had even heard of it was that it could keep users anonymous and free transactions from central authorities.

To some extent that’s still true. The people who bought shares of the two companies can protect their anonymity (not that anyone is trying to find out who they are), and the currency is still free from central bank influence, but the idea that an alternative financial system can grow in parallel without making contact with existing laws and regulators was never realistic, as Voorhees can attest.