Security or not? The SEC investigated this question in the case of ShipChain’s SHIP token. In the opinion of the US Securities and Exchange Commission, the startup has failed to register and must now face the consequences.
The fintech startup ShipChain is shipwrecked
The US Securities and Exchange Commission ordered on Mondayto cease operations. A US $ 2.05 million fine was also imposed. ShipChain allegedly committed a violation of securities laws in 2017. At that time, ShipChain had raised 27.6 million US dollars through the ICO of its SHIP token. The company accepted the sentence and thus avoided charges.
„The penalty represents essentially the entire net worth of ShipChain,“ according to the SEC ruling. ShipChain decided to “stop all operations”, it said.
With this, a token project comes to an abrupt end that has been under an unfavorable star for a long time. Everything had started very promisingly. ShipChain tried to build an automated ledger for international trading on the Ethereum blockchain. The start-up sold 145 million SHIP tokens to over 200 investors in late 2017 to early 2018. In an early whitepaper of the project, ShipChain stated, „The proceeds will be channeled into research, development, marketing, and legal.
SEC classifies ShipChain Token as a security
But the first regulatory problems arose shortly after the ICO. The supervisory authorities in the US state of South Carolina claimed that the SHIP token is an unregistered investment that also violates applicable law. ShipChain, which is based in South Carolina, was initially able to fend off the allegations. But the SEC took up the fight again, arguing that investors should expect returns based on business practice.“,
The SHIP tokens could not be meaningfully used or consumed with any ShipChain product at the time of delivery. As ShipChain demonstrated on its website, on social media and to the press, the funds raised through the ICO would rather be used for future product and technology development, among other things.
states the disposition. The token had to be registered with the SEC as an investment, but this never happened.
The SEC is also launching heavy artillery against Ripple these days . The cryptocurrency XRP is also classified as a security by the stock exchange supervisory authority and there is a risk of a legal dispute. However, Ripple CEO Brad Garlinghouse is playing the ball back and accusing the SEC of failing to take into account the natural conditions of the crypto market in their regulations.