Erik Voorhees Sells SatoshiDice, Bitcoin's First Major Acquisition

On July 18, 2013, Erik Voorhees announced he had sold SatoshiDice, the Bitcoin dice game he built, for 126,315 BTC, worth about $11.47 million at the time. It is widely cited as the first major acquisition in Bitcoin industry history, and thirteen years later, nobody has ever confirmed who bought it.

A Dice Game Funded by Unregistered Shares

SatoshiDice launched in late April 2012, and Voorhees capitalized it in a way that could only have happened in early Bitcoin: he sold ownership shares on MPEx, a Romanian Bitcoin securities exchange, in an offering that was never registered with any regulator. Between August 2012 and February 2013, SatoshiDice sold 13 million shares across two separate offerings, raising 50,600 BTC. At the time, that entire raise was worth about $722,659. Keep that figure in mind, because within five months it would look absurdly small next to what the company sold for.

Reading the Wind

On May 16, 2013, SatoshiDice blocked every US-based IP address from the site. A company spokesperson told CoinDesk: "The best way to limit legal risk for SatoshiDice, and thereby protect its stakeholders, is to block US players." The same statement declared that "SatoshiDice is building a ubiquitous global brand in the bitcoin space, and must take the coercive threat of government seriously."

The detail that makes this interesting is what did not happen: CoinDesk explicitly noted that no citation or notice from any government agency had prompted the move. This was not a response to enforcement. It was a founder sensing where the wind was blowing and getting his stakeholders out of the way. Two months later, he cashed out entirely.

An $11.5 Million Exit

CoinDesk covered the sale announcement the same day it broke (https://www.coindesk.com/markets/2013/07/18/bitcoin-company-acquisitions-begin-gambling-site-satoshidice-sells-for-115-million-126315-btc): 126,315 BTC changing hands, roughly $11.47 million, for a business whose share offering had raised $722K less than a year earlier. The buyer was never publicly named. Contemporary reports speculated it was "a significant existing gaming institute," but no confirmation ever surfaced, and the buyer's identity remains one of the enduring small mysteries of the era.

The Shareholder Payout

The buyout math for MPEx shareholders was unusually generous, and Voorhees made a point of saying so. Shares had originally sold for 0.00126315 BTC each, about 12 cents. As part of the sale, he paid shareholders an extra 0.00223685 BTC per share on top, bringing the total payout to 0.0035 BTC per share, roughly 32 cents. He characterized it as "a 277% premium over the sale price and a roughly 175% premium over the current market price."

"The Right Thing to Do"

His forum announcement, quoted by CoinDesk, struck a personal note: "I believe this to be a solid, desirable, and fair outcome for those who have put their trust in S.DICE." And to shareholders who had planned to hold for years: "While I know some S.DICE owners intended to hold for a long time, and will thus be dismayed by the buyout, it is my sincere hope that this compensation level will be amenable. It is substantially higher than the contract mandates, and it is almost 3x higher than all private owners are being paid. It has not been easy to negotiate to this level, but I believe it is the right thing to do."

The SEC's Epilogue

The regulatory risk Voorhees had been maneuvering around caught up with him anyway, just not in the way the US IP block anticipated. On June 3, 2014, the SEC charged him with two counts of offering unregistered securities, covering both the SatoshiDice share sales and a separate 2012 offering for a venture called FeedZeBirds. He settled for $50,843 in total, made up of $15,843.98 in disgorged profits plus a $35,000 penalty, and agreed to a five-year ban on issuing any Bitcoin-denominated unregistered securities. The first major exit in Bitcoin industry history closed with the founder eleven months away from a federal securities settlement over the very shares that funded it.

Part of an ongoing series on Bitcoin history. This event falls on July 18, 2013.