[BTC-TC] Virtual Community Exchange [CLOSED]

[pascal257]

• And he can't sell the exchange as a going concern to anyone else - because if his lawyers told him BTC-TC was illegal then they'd also have told him that he couldn't sell it (as a going concern) to anyone else.  It's a bit like if you'd been dealing drugs : your lawyer would very strongly advise you NOT to sell your stock to some other dealer.
• He MAY be able to sell the code-base - as that isn't illegal.  But obviously he's not going to even consider doing that until the exchanges are fully shut down.

He should make the code open source and just release it, that way someone with sufficient know-how can start a new exchange.

I really hope we don't have to rely on BitFunder in the future, let's hope Havelock wins something out of this!

[San1ty]

• And he can't sell the exchange as a going concern to anyone else - because if his lawyers told him BTC-TC was illegal then they'd also have told him that he couldn't sell it (as a going concern) to anyone else.  It's a bit like if you'd been dealing drugs : your lawyer would very strongly advise you NOT to sell your stock to some other dealer.
• He MAY be able to sell the code-base - as that isn't illegal.  But obviously he's not going to even consider doing that until the exchanges are fully shut down.

He should make the code open source and just release it, that way someone with sufficient know-how can start a new exchange.

I really hope we don't have to rely on BitFunder in the future, let's hope Havelock wins something out of this![/list]

QFT! I had a look at BF, no way in hell I'll own any shares there... Go Havelock or Go Home.

[Deprived]

• And he can't sell the exchange as a going concern to anyone else - because if his lawyers told him BTC-TC was illegal then they'd also have told him that he couldn't sell it (as a going concern) to anyone else.  It's a bit like if you'd been dealing drugs : your lawyer would very strongly advise you NOT to sell your stock to some other dealer.
• He MAY be able to sell the code-base - as that isn't illegal.  But obviously he's not going to even consider doing that until the exchanges are fully shut down.

He should make the code open source and just release it, that way someone with sufficient know-how may start a new exchange.

I really hope we don't have to rely on BitFunder in the future, let's hope Havelock wins something out of this!

Selling the code is the only chance LTC-Global shareholders have of getting anything back.[/list]

[velacreations]

2 questions:

1. Why is the manual threshold still in place (can anyone get their coins out)?
2. Why is there still a 0.0025 BTC fee reserve?

[Lohoris]

He should make the code open source and just release it, that way someone with sufficient know-how may start a new exchange.

And were's the profit in that?
It's not like it coded itself, developing such a project takes a huge amount of hours.

[bitzox]

Maybe something can be done in the framework of this new crowd funding legislation, but i havent read up on it yet.

That would require the SEC to get off their asses and finalize the crowd funding regulations.

[Deprived]

It seems highly unlikely to me that he's been told to close down by the SEC or any LE.  Were that to have happened then closure would have been more of a case of pulling the plug out than the gradual winding down that has been announced.  This feels far more like being told to stop by his own lawyers than a cease-and-desist or seizure by some government agency - they don't give you a month to sort things out in, they want immediate cessation of activity.

This sounds spot on. If it was the SEC they wouldn't allow an illegal exchange to continue operating for another month.

Deprived I have a question if you would be kind enough to answer.

What process would have Burnside had to go through to make the exchange legal?

Because exchanges are able to run in the USA. So I am sure there must be a path to create a legal compliant exchange.

Do you have any idea?

Well I'd say that, pretty obviously, his lawyers have told him there's NO practical way it can be turned into something legal.  That doesn't mean it's impossible to run a legal exchange - just that it's not possible to turn BTC-TC into one.  I don't think there's one simple reason why that's the case - it's a mix of a few things.  None of the things on their own are a problem - but put them all together and as soon as he hired a lawyer it was pretty obvious that at a minimum US investors (and probably issuers) would be getting the boot.

1.  There was no restriction on who could use the exchange.  Neither in terms of a membership fee/referral system (making it private) or in terms of restricting access to those meeting certain criteria (such as $X in cash).
2.  There was no AML/KYC process.
3.  Despite the site claiming everything was virtual, many securities explicitly refer to USD in their contracts - including some with dividends and/or face values defined in fiat rather than BTC.
4.  Some securities relate to real businesses/companies.
5.  The site makes contradictory claims (and actions) in terms of due diligence conducted by the operator.

The problem with trying to continue would largely be that MASSIVE work would be needed on some securities - and others would end up having to be delisted.  But if BTC-TC were to try to become 'legitimate' then it would no longer be able to claim protection against any losses incurred as a result of actions its operator took.  Continuing would gut the site (in terms of securities - and possibly of investors) and expose burnside not just to liability going forward but also liability for actions he'd taken in the past.  Which is another reason he won't be able to comment much about the legal advice he received - doing so could increase his liability.

I believe he was naive believing the "it's a game" thing would work - but genuinely did his best to try to make it happen until he spoke to lawyers who likely just laughed at the idea.  I'm sure he'd LIKE to explain everything in detail but can't as it would be very risky for him to do so.

Let's be clear about one thing here.  ALL of us who used the sites knew (or should have known) that the sites were, at best, in a bit of a grey area.  Trying to lump all the blame for that on burnside is totally unfair.  If he was naive then so was everyone else who acts all surprised now.  I'm not surprised nor do I blame him for what losses I'll make - that's the result of MY decision to 'gamble' NOT his decision to allow me to 'gamble'.  I'm mainly grateful that he's shutting down in an orderly fashion rather than the cluster-fuck/theft that occurred when GLBSE ended.

[killerstorm]

• And once your lawyers have told you that you must not do something then you lose the ability to claim that you believe it to be OK.  As if your lawyers strongly advise you on a course of action and you choose not to follow it they are typically going to ask you sign a statement that they advised you NOT to do what you're doing - so their ass is covered.
• He MAY be able to sell the code-base - as that isn't illegal.  But obviously he's not going to even consider doing that until the exchanges are fully shut down.

Why can't he simply transfer everything to a different operator?

E.g. suppose it was a forum. One could transfer post database and forum software to a different operator, no formal sale is necessary: he is simply sharing information.

Things are more complicated because there are also balances, and transfer of money to other people has consequences.

But he could force everybody to withdraw all funds, then transfer database, and once new operator runs the server deposits can be re-enabled.

It isn't illegal to share trade/ownership database, is it? (Especially as ownership is already shared with asset issuers.)

Only transfer of money (cryptocurrency) is a potential problem.

As for LTC-GLOBAL investors, it can be informal agreement with new operator that he will honor their ownership. IIRC they only own 10% of exchange, so it shouldn't be the problem.

Disclaimer: IANAL and I'm talking out of my ass.

[glendall]

Well no doubt some folks made money in today's panic.... like Labcoin, wow: 24hr low of 0.00025, high of 0.0027    (yup , those are the correct amount of 0's in that).

[Puppet]

Let's be clear about one thing here.  ALL of us who used the sites knew (or should have known) that the sites were, at best, in a bit of a grey area.  Trying to lump all the blame for that on burnside is totally unfair.  If he was naive then so was everyone else who acts all surprised now.  I'm not surprised nor do I blame him for what losses I'll make - that's the result of MY decision to 'gamble' NOT his decision to allow me to 'gamble'.  I'm mainly grateful that he's shutting down in an orderly fashion rather than the cluster-fuck/theft that occurred when GLBSE ended.

Well put, couldnt agree more.

[pascal257]

He should make the code open source and just release it, that way someone with sufficient know-how may start a new exchange.

And were's the profit in that?
It's not like it coded itself, developing such a project takes a huge amount of hours.

Thanks Captain Obvious.

Maybe there are legal reasons why he isn't considering selling the project. If he was willing to sell it, I'm sure he'd written it in the shutdown notice.

[Lohoris]

He should make the code open source and just release it, that way someone with sufficient know-how may start a new exchange.

And were's the profit in that?
It's not like it coded itself, developing such a project takes a huge amount of hours.

Thanks Captain Obvious.

Maybe there are legal reasons why he isn't considering selling the project. If he was willing to sell it, I'm sure he'd written it in the shutdown notice.

And what does this have to do with your suggestion of "just giving it away for free"?

[Deprived]

Why can't he simply transfer everything to a different operator?

E.g. suppose it was a forum. One could transfer post database and forum software to a different operator, no formal sale is necessary: he is simply sharing information.

It doesn't work like that.

Imagine it's a forum with lots of child-porn posted on it.  You CAN'T sell the forum complete with content.  But you could sell the forum software.

If something is illegal to own/do and you have some of it then you can't (legally) sell it once you realise it's illegal - even if it's bundled together with other stuff that's perfectly innocent.  And that extends to conducting an illegal business.  The software on its own could be used to run things that are perfectly legal.  Selling it with data relating to specific things are aren't (as his lawyers will have told him) legal crosses the line.

The problem here isn't the exchange itself or the software - it's the investors, issuers and securities.  And not only is the issue whether they're legal - it's also that if he sells the exchange on fully functional then he has no closure in terms of getting away from liability in respect of the software, exchange and securities on it.

[pascal257]

Thanks Captain Obvious.

Maybe there are legal reasons why he isn't considering selling the project. If he was willing to sell it, I'm sure he'd written it in the shutdown notice.

And what does this have to do with your suggestion of "just giving it away for free"?

As you just stated, writing the code behind the exchange consumed multiple hundred, possibly even thousands of hours of work. Why should that just go to waste if it can't be sold?

[Maciek]

I would encourage those who are attacking Burnside with anger to turn their attention to the "regulators" that are apparently threatening to bring force into a situation that is peaceful and consensual. It's hard to do this because we don't know exactly who they are. We do know that they feel they can't compete in a free market unlike Burnside who eagerly endeavored to do so. They feel they must threaten force to maintain their position instead of enticing people to cooperate as Burnside has. For this reason I wish the best for Burnside and the worst for the aggressors.

We should take our emotions regarding this failure and channel them into a sustained effort to architect a better securities exchange system. Bitcoin has worked so well because the architecture was decentralized and Satoshi was anonymous. We need apply these principles to the development of a more resilient securities market.

+3

"Colored Coin... We need you... "

[JohnyBigs]

Can we still make deposits? Before last trading day?

[Deprived]

Can we still make deposits? Before last trading day?

Yes, deposits work fine.

I've done significant(ish) deposits to both BTC-TC and LTC-Global today to get funds in so I could close my securities out.

[Rannasha]

Can we still make deposits? Before last trading day?

The exchange should be fully operational (with the exception of new registrations & asset creation) until 7 October.

[metal_jacke1]

Every share holder contacting the issuer is not going to help the process or speed things up, it is probably best to give them a few days(the ones you trust anyway) to sort alternatives and figure things out for themselves as i doubt BS gave them anymore notice than the shareholders.

Contacting any other parties in advance was not an option.  There should be plenty of time to figure things out.

I don't understand. What prevents you from telling us now? Did the sec put a gag order on you?

Let me explain what the most likely scenario is - and what the answers are then to your question and some other common ones.

Burnside retained legal counsel to advise on what to do to ensure BTC-TC was legally fine (that's already known).
His lawyers advised that there was no way he should continue doing what he's doing and that he needed to stop doing it.  And that he needed to stop doing it without creating further liability for himself.

• At that point he CAN'T explain what his lawyers advised him - as to do so involves admitting that he was breaking the law.
• And he can't sell the exchange as a going concern to anyone else - because if his lawyers told him BTC-TC was illegal then they'd also have told him that he couldn't sell it (as a going concern) to anyone else.  It's a bit like if you'd been dealing drugs : your lawyer would very strongly advise you NOT to sell your stock to some other dealer.
• And once your lawyers have told you that you must not do something then you lose the ability to claim that you believe it to be OK.  As if your lawyers strongly advise you on a course of action and you choose not to follow it they are typically going to ask you sign a statement that they advised you NOT to do what you're doing - so their ass is covered.
• He MAY be able to sell the code-base - as that isn't illegal.  But obviously he's not going to even consider doing that until the exchanges are fully shut down.

It seems highly unlikely to me that he's been told to close down by the SEC or any LE.  Were that to have happened then closure would have been more of a case of pulling the plug out than the gradual winding down that has been announced.  This feels far more like being told to stop by his own lawyers than a cease-and-desist or seizure by some government agency - they don't give you a month to sort things out in, they want immediate cessation of activity.

Although I ran multiple securities on LTD-Global/BTC-TC I was provided with no more information than the rest of you (and that IS how it should be).  As recently as yesterday I was in contact with him about sorting out a problem with the locking state of a new security I was working on.  I had, of course, already realised there was a pretty decent likelihood of BTC-TC closing or removing access from US investors/issuers - that became evident as a possibility as soon as signups/creation of securities was disabled without any explanation (plus the rushed addition of withdrawal addresses for issuers).

Firstly, I doubt his lawyers would say it was "illegal". No precedent. No law on the books regarding bitcoin and securities.

Further, you would WANT any litigation because if any federal judge said, this is just a virtual game as BTCT stated in their policy blah blah blah then that would be a win for bitcoin. Something the government does NOT want at all.

Chances are either he's just tired of doing it (doubt it) or he got a letter from SEC. Rather than caving he should challenge.

[baloo_kiev]

All this situation is extremely disappointing. If we consider it 'grey area' and 'gamble', we must agree that every BTC exchange is also grey area and gamble. Just look at recent problems: MtGox, CoinLenders, now BTC-TC. What next? Other exchanges? And then pools? None of them has AMC/KYC as far as I know.

Another disappointing tendency is that the concept of trust seems to be not working. If someone was fair before, it doesn't mean he will not eventually scam you (BFL, Avalon). If a service operated succesfully for a long time, it still doesn't mean it won't shut down one day (like BTC-TC today).

I am starting to loose faith in BTC. Those government bastards will destroy it or just push it from the 'grey' area to completely illegal field. Maybe it will even cause a boost in BTC price but I will not be satisfied. They can just turn my coins into something like a kilogram of cocaine: yes, it costs a shitload of money but normally I don't want to possess it, and if I try to sell it, I will most probably end up in jail