Erik Voorhees and Salt Lending Investigated by SEC – Report

News and Analysis

Bitcoin loans startup Salt Lending and its former CEO, Erik Voorhees, are said to be under investigation by the U.S. Securities and Exchange Commission (SEC).

As reported by The Wall Street Journal, “people familiar with the probe” are saying that Salt was subpoenaed by SEC in February seeking information on its $50 million initial coin offering (ICO) held in late 2017.

Apparently under investigation is whether Salt’s crypto fundraising effort was in fact a securities offering that should have been registered with the regulator, the WSJ says, as well as how tokens were distributed to “insiders” and how the sale proceeds were spent.

Erik Voorhees was charged by the SEC in 2014 for securities violations that ultimately saw him banned from making a Bitcoin security offering for the following five years. He was also fined $50,000.

That case arose from the SEC’s view that Voorhees had publicly offered securities without registering with the federal government related to the solicitation of shares in SatoshiDICE and FeedZeBirds between 2012 and 2013.

WSJ’s sources also suggested the SEC is investigating whether Voorhees conducting crypto-based fundraising while on the board at Salt Lending violated the 2014 ban. The SEC reportedly declined to comment on the matter, when asked by the newspaper.

Keith Higgins, chairman of the securities and governance practice at Ropes & Gray LLP and a former SEC division director, told the WSJ:

“A provision in the [2014] settlement makes him a so-called ‘bad actor’ unable to rely on an SEC safe harbor for private, unregulated stock sales.”

Backing up the WSJ’s sources, a private lawsuit filed Tuesday in Colorado by a former Salt executive also states that Salt is under SEC investigation.

Salt executive Jennifer Nealson said that the firm was subpoenaed by the SEC early this year, adding that Voorhees was no longer working for the firm “in any formal capacity.” The firm announced an interim CEO and president in July.

Aside from being listed on Salt’s summer 2017 SEC filing, Voorhees was also named as a Salt director on the company’s site and promotional materials, according to the WSJ’s review. In November 2017, Salt reportedly amended its SEC disclosure, declaring the $1.5 million it had raised, and refraining from any mention of Voorhees.

Brian Klein, the trial attorney who represented Vorhees in his 2014 settlement with the SEC, has responded to the WSJ article, tweeting:

The news comes after a WSJ report in September 2018 claimed that ShapeShift, the crypto exchange platform Erik Voorhees owns, had been used by criminals to launder $9 million.

Voorhees responded soon after, saying the claims were “factually inaccurate and deceptive.”

He said the exchange had been working with the WSJ for nearly six months, but the eventual report “omitted relevant information” and showed that “the authors do not have a sufficient understanding of blockchain and our platform in particular.”

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