For US persons and companies, raising money on GLBSE is a felony under the Securities Act of 1934. To create a publicly traded investment, you have to register with the Securities and Exchange Commission first, and file forms like SEC Form 1-A.

This form starts with:

ITEM 1.
Significant Parties
List the full names and business and residential addresses, as applicable, for the following persons:
(a) the issuer’s directors;
(b) the issuer’s officers;
(c) the issuer’s general partners;
(d) record owners of 5 percent or more of any class of the issuer’s equity securities;
(e) beneficial owners of 5 percent or more of any class of the issuer’s equity securities;
(f) promoters of the issuer;
(g) affiliates of the issuer;
(h) counsel to the issuer with respect to the proposed offering;
(i) each underwriter with respect to the proposed offering;
(j) the underwriter’s directors;
(k) the underwriter’s officers;
(l) the underwriter’s general partners; and
(m) counsel to the underwriter.

You don't get to issue securities anonymously in the US. The usual penalty is 5 years in prison.

Here's a typical FBI report of a conviction for selling unregistered securities.. One of those people gets out of the Federal pen in 2015.

Operating entirely on line won't help. An online unregistered securities operator who ran AdSurfDaily is was arrested and is facing felony criminal charges. If you're wondering what the legal definition of a "security" is, see this court decision against the operator of AdSurfDaily. The terms for AdSurfDaily sound a lot like the ones for many GBLSE investments. Here's what AdSurfDaily advertised:

   Rebate Distribution: Ad purchase sales and banner ad sales on the Cash Generator and the sale of ebooks will be totaled at midnight each night and 50% of the gross sales will be rebated to add purchasers. Fifty percent of the commissions that the Cash Generator earns from their sister site, “Attract Marketing System,” will also be paid as rebates to ad purchasers on the Cash Generator.

Every night at midnight the number of eligible ad packages will be totaled and divided into the total ad package sales, banner ad sales and ebook sales to determine the amount of the rebate for each ad package. That amount will be multiplied by the number of ad packages in each advertiser’s account and the total will be credited to his/her cash balance account. Rebates will show up in your account after midnight EST.

Sounds like a lot of GBLSE offerings, doesn't it? That was held to be an "investment contract" requiring SEC registration in UNITED STATES OF AMERICA v.THOMAS ANDERSON BOWDOIN, JR., Defendant, Criminal Action No. 10-320 (RMC), United States District Court, District of Columbia, March 18, 2011. Mr. Bowdoin is looking at 125 years in prison, max.

They thought of that back in 1934:

A security is "any note, stock, treasury stock, security future, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a 'security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or bankers' acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited." - Section 3a item 10 of the 1934 Act.

There's no mention of "money" being required. Courts have since ruled that new financial gimmicks invented after 1934 should be considered securities if they look or work like anything in that list. Bowdoin, the AdSurfDaily guy, made the argument that a share in an web ad-rotator wasn't a security. The court didn't buy it.

It's not hard to understand.

The investment-club exemption doesn't apply here; that requires a real voting membership organization set up as a formal partnership. Some people here may be accredited investors, with net worth over $1 million, but an offering made to anyone doesn't qualify for that exemption. There's also a short form SEC registration for small offerings, but that requires a filing with the SEC.

People have tried to come up with scams that don't fit the definition of "investment" and "security". In SEC vs. Howey, the Supreme Court basically said that if something not listed in the Act acts like an investment, it is.

It's worth looking into the AdSurfDaily case. The guy behind that acted like his scheme wasn't subject to regulation. He made noises about "sovereign citizens".  Didn't work.  $80 million in forfeitures pried the money out of the scam and DoJ has a claim program to give it back to the investors.  The people behind the scheme have been indicted and are going to trial soon.

GLBSE sets itself up like a stock exchange, and encourages people to buy and sell their stocks. Arguing that those aren't securities is not going to fly.  Sorry, guys.

All of them, and probably something else. Its just not yet ripe for prosecution. The prosecution can start building the case and gathering the evidence once there's a first signature under the sacramental "I certify under the penalty of perjury that the foregoing financial statements are true and correct".

Until then the Gavin Anderson's way is still available: close the business before a first audit and return all solicited funds. This is a supreme defense.

By the way: the monopoly money is clearly marked as such in a big type. Some people may think that the tiny-type pale grey on white discalimer will protect them. I'm thinking it wont.

The "glbse.com" domain is owned by

James McCarthy, White Rock Cottage, Hacketstown, Carlow, IE.
+353.13870661095

That's a real house in Ireland, owned by Frances Hackett, email "mccarthyfrances@gmail.com". Might be a relative. Ireland is in the European Union, so European securities laws apply.

Ireland has a tough legal code in some areas. Bankruptcy in Ireland is severe.. A creditor can force an individual into involuntary bankruptcy if they owe more than EUR2000 and can't pay. "All the debtor’s assets and property vest automatically in the Official Assignee. The Bankruptcy Act 1986 allows the  bankrupt to retain “such articles of clothing, household furniture, bedding, tools or equipment of his trade or occupation or other necessaries for himself, his wife, children and dependent relatives residing with him, as he may select, not exceeding in value [€3,175] or such further amount as the Court on an application by the bankrupt may allow."

For the next 12 years, an Irish bankrupt cannot "act as an officer of or directly or indirectly take part or be concerned in the promotion, formation or management of any Irish company or even of any foreign company which has an established place of business in Ireland. " The bankrupt's name and other information is published in newspapers. And they can't borrow more than EUR630.

I once had to collect a few hundred thousand dollars from an Irish company. They paid once I mentioned involuntary bankruptcy. Merely being far away does not insulate you from debt collection any more.

I think neither. The underwriter has the most risk of being prosecuted.

GLBSE is kind of an agglomeration of underwriter, sales agent and exchange. In the normal finance those functions would be spread amongst separate entities. GLBSE provides some of each, with the additional mix-in of possible conflits of interest.
This is the typical situation. But sometimes a security that is issued and sold completely legally becomes a subject of litigation purely because of subsequent illegal sales practices over which they had no control. There's some case law about incorrectly issued ADRs for which the entire culpability was placed on the underwriter and sales agent in the USA, not on the original issuer. There were also cases related to reverse-buyout where the pre-buyout directors were found innocent and the entire culpability was placed on the post-buyout directors and executives.

For over 10-years now I'm involved in a privately-run enterprise and no longer have any contact with the lawyers that I worked with in the past in the publicly-traded company. I thus apologise for not providing a proper legal citations. Its a complex and very interesting subject, where the quick one-liners are raraly a full answer.

I really hope this isn't true.

Asked on Stack Exchange and Quora.

Implying that these portions are applicable to GLBSE? In what way?


Whoopty do, some of us don't care.


False information, such as?


I don't understand what this has to do with GLBSE.


It's always interesting watching them try to criminalize more and more non violent behavior.

So, why not just comply  with the SEC and make GLBSE legal? I know  easier said than done, but doable, right?