Tweets Claim SEC Inquiring About ‘Hundreds’ Of Bitcoin-Themed Companies

4th UPDATE 8:09 A.M. EDT OCT. 30 U.S.A. In the past several hours, Tweets sourced to Bitcoin-themed publications such as CoinFire, CryptoCoinsNews and CoinTelegrah claim the SEC has opened preliminary inquiries into hundreds of Bitcoin-themed enterprises.

On the CoinTelegraph website, the publication asserts there is a “gag order attached to these requests for voluntary cooperation.”

For starters, there appears to be no independent corroboration from the SEC of the inquiries. None may be forthcoming, given that early inquiries — if they exist — are not public by design. Moreover, references to a “gag order” may be a misinterpretation of a phrase the SEC uses when opening preliminary inquiries. Using boilerplate language, the SEC typically informs the subjects of the inquiries that “This investigation is confidential and non-public.”

The language is designed to protect both the recipient’s interests and the SEC’s. So, if the claim that a “gag order” has been issued is hung around the boilerplate language concerning the confidential nature of SEC inquiries at this early stage, it very well may mean the “gag order” claim is incorrect.

Not all inquiries result in an enforcement action that involves a U.S. federal court or an SEC administrative law judge. Some do, however. Here, via the Chicago Sun Times, is an example of a nonBitcoin enterprise that received an SEC boilerplate letter in September 2013 and later became the subject of a full-blown  investigation that led to an enforcement action in June 2014.

On the whole, though, we’d say the odds the SEC wants to look down certain Bitcoin-themed rabbit holes are very high — notwithstanding the fact that the PP Blog cannot confirm the Twitter claims about the inquiries.

It is obvious that Bitcoin-themed HYIPs are operating. Another area of obvious concern: Are Bitcoin-themed enterprises running crowdfunding scams?

One thing to look for as this situation evolves is crackpot “defenses” of everything Bitcoin. In response to the Tweets and coverage on Bitcoin-themed publications of the asserted SEC inquiries, some such defenses already have surfaced. One poster on CryptoCoinsNews, for example, appears to be advancing a conspiracy theory that the SEC is trying to dupe recipients of the asserted inquiry letters into confessing jurisdiction.

In the Comments thread, the poster suggests that recipients of the asserted inquiries should respond as such (italics added):

“I _______ (state your name), present myself in pro pria persona for a special appearance, as to be distinguished from a general appearance and respectfully ask [the court to direct the prosecution] to prove for and on the record all elements of jurisdiction binding me to perform in any way whatsoever.”

The problem with such a response is that it comes off sounding like so much “sovereign citizen” poppycock that it has the potential to subject to additional scrutiny those who’d adopt the guidance. Beyond that, even if the inquiries actually are taking place, no court appears to be involved at this time and it’s already clear that the SEC has jurisdiction over matters pertaining to securities.

Other “defenses” suggest the SEC is sending out a squad of “goons” to make it hard for companies to do business and that the SEC is interfering in “contracts” between consenting adults.

For whatever reason, various “defenders” of online “opportunities” have adopted a bizarre narrative that more or less asserts that all commerce is lawful as long as the parties entering a contract agree that it is lawful. Such constructions, however, would legalize murder-for-hire, terrorism plots, extortion, human trafficking, selling narcotics to school children and many other pursuits society rejects.

Simply put, there are a lot of holes in claims that all commerce is lawful as long as the parties agree that it is lawful. Such constructions would mean that John Q. Bloodthirsty Political Extremist could enter into a contract with Carlos the Jackal to plant a car bomb designed to kill innocents in France — and no government or no person could do anything about it, including maimed survivors who never agreed to be disfigured at the hands of the contracted parties.

It is no more lawful to operate an HYIP or crowdfunding scam that involves Bitcoin than one that involved Liberty Reserve, alleged to have helped criminals launder $6 billion.