The United States Securities and Exchange Commission (SEC) has issued a cease and desist order against ShipChain, a blockchain company that raised $27.6 million in an initial coin offering (ICO), for allegedly distributing unregistered securities.
ShipChain raised the handsome amount by selling SHIP tokens between 2017 and 2018, riding on that ICO wave. The company promised to develop an Ethereum-based blockchain system to track the shipping containers.
The financial market regulator is now alleging that the tokens fall under the category of securities, but the blockchain company did not register them as one. ShipChain sold more than 145 million SHIP tokens.
The company approached the investors promising to utilize the proceeds from the ICO to develop the blockchain system that will “jumpstart the ShipChain economy and supplement funding to help [ShipChain] deliver the best product possible.”
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Bust of Another ICO
“A purchaser in the offering of SHIP tokens would have had a reasonable expectation of obtaining a future profit based on ShipChain’s representations and efforts to build its business, including through its use of the ICO fund proceeds to develop its platform,” the SEC noted in its order.
Now, the regulator wants the blockchain company to transfer all SHIP tokens to it and delist them from crypto exchanges. Additionally, it is seeking a civil penalty of $2,050,000.
The impact of the order is reflected on the crypto market as the SHIP token prices plummeted over 62 percent in the last 24 hours. Currently, SHIP tokens are trading at $0.001179, while at the peak in April 2018, each token was priced at $0.19.
Furthermore, ShipChain received a similar cease and desist order in May 2018 from the securities regulator in South Carolina, where the company is based, for violating state securities laws.