There are a lot of news articles out there now that cover the SEC settlement and resulting disgorgement. Unfortunately very few of them tell the whole story, doing little more than regurgitating the SEC press releases. Reality is that the site was created when litecoins were fractions of a cent as a hobby crypto project. Before long after that the environment changed rapidly, litecoins skyrocketed in value and the sites ended up being an overnight success, some would say they were way ahead of their time. It is important to understand the environment at the time the sites were created. Early to mid 2012, while conceiving and working on the initial versions of the websites, the Litecoin and Bitcoin ecosystems were fundamentally different than they are today. They were called Virtual Currencies, now many prefer to call them Digital Currency or Crypto Currency. Why the community push to change the name? Because Virtual means not real, or to snag a specific dictionary quote: "Simulated; performing the functions of something that isn't really there." The vast majority of us got our Litecoins or Bitcoins "for free" by mining them, with hardware we already had on hand, using CPU's and GPU's that were already built into our computers. It wasn't until April 2013 that Butterfly labs started shipping dedicated ASIC mining hardware. Back in 2012, few of us were buying or selling them, and when we did it was small change at very meager exchange rates. Additionally there was extreme risk of all of your Litecoins or Bitcoins getting wiped out. Either by loss (hard drive crash, filesystem corruption, client software bugs, etc.) or by some flaw in the crypto currency networks that could wipe out your coins like a 51% attack, double-spend attack, unknown vulnerability, etc. Point is that unless you were a serious Silk Road user, most rational people looked at these as little more than play money, or monopoly money in 2012. I'm an old school gamer. Remember Zork, Hitchhikers Guide to the Galaxy, TradeWars, etc? On occasion I had tried developing games like that. In mid-2012 very shortly after I first became aware of Litecoins I got an itch to do a new game / simulation, one that would help people. The idea was to use Virtual Currency like video game money (eg; WoW Gold or Linden Dollars) and build an environment where people could safely learn about financial markets without having to use their real money. As the site took shape I took steps to make sure that no one would mis-understand the intent. I called it a "Virtual Stock Exchange". (Virtual = not real) I put in clear text saying it was for educational and entertainment use only. I put together a terms of service that made it clear that the assets were not to be considered real, and that there was no underlying value. I programmed it such that the community could create the assets, manage them, and trade them. The idea was that I wanted it to all function with a minimum of day to day management. Was I short-changing Virtual Currency at this point? Absolutely. I was extremely skeptical that it'd ever amount to anything more than play money. The initial site was Litecoins only and I sold virtual shares in the site itself. (If converted to dollars, the shares sold were pocket change.) Why sell shares at all? I wanted people to be more involved in the site, so I programmed it such that if you held a few shares in the site, you could then be an admin on the site. These admins controlled most of the content of the site via a voting and commenting mechanism and helped the community greatly in the process. I didn't need additional income at the time, my full time day job provided plenty. What I needed was a set of committed "moderators" to manage things so that I wouldn't have to. Keep in mind that "shares sold" are within the 2012 environment outlined above... Virtual Currency, Virtual Exchange, Not Real. What went wrong? Looking back it seems like a near perfect storm. GLBSE failed and the community asked for a Bitcoin version of my Litecoin site. I was hesitant because I didn't want to spend more time on the project. I offered to sell the code so someone else could do it, but there were no takers and I caved to community pressure in December 2012 and setup the BTC version. Rather than selling shares in the new site, I spent programming time cross-connecting the two sites so that the moderator pool would be shared. Three to four months later BTC skyrocketed in value. (Most likely cause now seems to be manipulation by MtGox) This fundamentally changed how people looked at the sites and their assets. With the virtual currency background and nature of the site's terms, we were not quick enough in the realization of this changing environment, and that we had fallen afoul of US securities laws. We sought legal assistance, trying to figure out what to do, and a month or so later we received a notice from the SEC that an investigation was in progress and that we were not allowed to disclose the investigation publicly. I suspect the gag order was because others in the space were also being investigated and they didn't want us tipping them off. A week or two after that a judge in Texas declared that "Bitcoins are Money" and the final decision was made to shutter the site. The legal team did a great job working through the shutdown with the SEC. Steven Ungar, Dwight Holton, Barry Abbott, Jeremy McDermond, John Keller, and Kristen Tranetzki all contributed with their respective expertise. We were very open with the SEC, as we needed to quickly distance ourselves from Trendon Shavers (pirateAt40) and other cases with Bitcoin that had been ongoing. The SEC was great to work with. They took the time to listen to what we had to say and worked with us to help protect all of the site users interests as much as possible. Lists of asset holders were sent out to all the asset operators, all the users Bitcoins and Litecoins were returned, users were given API access to download their records, and trading quietly came to a close. A few interesting tidbits: The site at it's peak had over 50,000 BTC and 200,000 LTC safely on deposit and saw volume of over 30,000 BTC on busy days. The site broke new ground for security in the space, integrating Yubikey and Google Authenticator, as well as various approaches to managing deposits, withdrawals, and trades such that losses to account compromises were minimal. (No one using the full suite of security features was compromised.) The site also broke new ground for accessibility. The cutting-edge oAuth API allowed users to create third party Android and iPhone apps and to trade via their own desktop apps. If someone had wanted to, the API was fully featured enough to create a near clone of the site just using the API. The site also broke new ground in terms of transparency and account records accessibility. Account records were available in several formats such as CSV and JSON and we spent extra time and energy and money out of pocket keeping the CSV records available for more than a year after shutdown so that anyone doing their taxes could get what they needed. (After all, if the site was shut it down for being too "real", then there were "real" gains and losses to be had.) The site at shutdown stood out as one of the few in the history of Bitcoin sites that has both closed, and returned users full account balances, proving that the site was not running a fractional reserve as many at the time were. Starting out as a hobby project, the site ran on a server that was very low-power. It had an Athlon X2 CPU dating back to 2006, 3 GB ram, and a pair of 160 GB HDD's running software RAID 1. The site code was extremely efficient and heavily optimized for speed and caching. Toward mid-2013 however, we started having issues with bitcoind, the Bitcoin software used for the site's hot wallet, and it had to be split off to a separate higher powered server. (no, there's no way I would use this setup today!) The site was very successful in it's goal of education. I've received numerous emails expressing thanks for the opportunity to trade in a safe environment where people were able to learn about the differences between stocks and bonds, or calls and puts. Many people genuinely used it for it's true purpose of learning and expanding their horizons. If you were one of those people that wrote me, I'd like to extend a huge THANK YOU. Those notes were what kept me going as I dealt with all of the ups and downs. Cheers ... burnside