When you follow SEC enforcement closely for a while, you begin to think that you know the universe of currencies and securities that are at issue in these cases. In the last 10 days, however, the SEC has gone off of the usual menu a bit and brought two unusual cases.

On July 23, 2013, the SEC charged Trendon T. Shavers with a Ponzi scheme that did not involve dollars or some other conventional currency but rather something called "Bitcoin." The SEC defined Bitcoin as "a virtual currency traded on online exchanges for conventional currencies like the U.S. dollar or used to purchase goods or services online." 

According to the SEC, Shavers founded Bitcoin Savings and Trust (BTCST) and sold Bitcoin-denominated investments through the Internet. He allegedly "raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold." 

The SEC claimed that in reality, BTCST was a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments. Andrew M. Calamari, Director of the SEC's New York Regional Office, stated that “fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws.”

A week later, on July 30, 2013, the SEC filed a case against a trader in Spain who allegedly took advantage of inside information about a proposed acquisition of Potash Corporation by purchasing Potash "contracts-for-difference," or CFDs, in advance of the public announcement. The SEC explained that CFDs are "highly leveraged securities not traded in the U.S. but based on the price of U.S. exchange-listed Potash stock. The CFDs mirrored the movement and pricing of that stock"

The SEC's Daniel M. Hawke, Chief of the Market Abuse Unit, stated that “to those who think they can mask their insider trading by trading CFDs rather than the underlying equity security, this case demonstrates our resolve to detect such trading and hold them accountable for violating the federal securities laws.”

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