South Carolina Sanctions Startup Over Unregistered Token Sales

South Carolina securities regulators have ordered ShipChain to cease selling its tokens within the state.

AccessTimeIconMay 22, 2018 at 9:07 p.m. UTC
Updated Dec 10, 2022 at 7:59 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Blockchain startup ShipChain has been hit with a cease-and-desist order from the South Carolina Attorney General's Office, which claimed the company violated the state's securities statutes.

The state's Securities Commissioner said in an order issued Mondayhttp://2hsvz0l74ah31vgcm16peuy12tz.wpengine.netdna-cdn.com/wp-content/uploads/2018/05/ShipChain-Inc-Administrative-Order-to-Cease-and-Desist-COS-01685821xD2C78.pdf that ShipChain offered what amounts to an investment contract by way of its token, which is "the only medium of exchange on the platform."

The order stated:

"At all times relevant to this Order, Respondent ShipChain continuously offered investment opportunities in the ShipChain platform and the corresponding tokens to South Carolina residents through its website and in-person events held in South Carolina. At no time relevant to the events stated herein was Respondent ShipChain registered with the Division as a broker-dealer, and no exemption from registration has been claimed by Respondent ShipChain."

ShipChain bills itself as an ethereum-based platform for tracking the shipment of goods. It's also a member of the Blockchain in Transport Alliance, which counts major firms such as FedEx and JD.com among its ranks.

The order – if finalized – would bar ShipChain from "transacting business" and "from participating in any aspect of the securities industry in or from the State of South Carolina." The startup has 30 days to request a hearing on the matter, where it may argue that its token sales do not qualify as an unregistered securities offering.

A request for comment was not immediately returned by ShipChain. However, the startup acknowledged the order on Twitter and said it was working on a formal response.

ShipChain's publicly traded token saw a steep drop in value on Tuesday, and as of press time is trading at $0.065 – down 39 percent compared to yesterday –  according to data from CoinMarketCap.

Shipyard image via Shutterstock

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.