Well he was just referring people to sign up for the website. The money was money he spent advertising the website(?), so the money only went to getting new members. The stocks were given as the reward for the most sign ups, not in exchange for money.
The point is that the stock was exchanged for something (referrals, marketing, etc), and that the contest was announced (ie, general solicitation). That no cash traded hands doesn't matter.
There is precedent of an almost identical enforcement action by the SEC, but my google fu is failing me.
