The US SEC Fines Shipchain $2 Million for Conducting an Unregistered Token Offering: Company Agrees to Cease Operations

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The US Securities and Exchange Commission has issued an injunction against Shipchain, imposing a fine of $ 2.05 million. In addition, regulators have instructed Shipchain, a shipping and logistics company, to transfer ship tokens owned or controlled by the company’s directors to a “fund administrator”.

Unregistered token sale

In a statement announcing the injunction, the SEC alleged that Shipchain, which “promoted its company and the ICO through various media,” raised $ 27.6 million from a pre-sale in late 2017 and early 2018 . The supervisory authority explains:

In total, Shipchain sold approximately 145 million ship tokens to approximately 200 people or groups of people, including US persons, for approximately $ 27.6 million (consisting of fiat currency and digital assets such as bitcoin or ether, valued at the time of receipt).

The SEC insists that “token buyers had a reasonable expectation of profit due to Shipchain’s efforts.” That expectation, as well as Shipchain’s many promises to buyers, mean that the sale of ship tokens has reached the threshold of a security offering. But according to the SEC:

The offer and sale of ship tokens by Shipchain were not registered with the Commission, nor was the offer and sale of ship tokens by Shipchain a valid exemption from registration.

Accordingly, the regulator says that pre-selling ship tokens violated Section 5 (a) and 5 (c) of the Securities Act, which prohibits soliciting for funds without registration and approval from the SEC.

Ship chain stops all operations

Meanwhile, Shipchain has agreed to work with the SEC by committing to assist in the process of permanently deactivating the ship’s tokens. The Company has also agreed to post the injunction on its website and through the Company’s social media channels “within 10 days of the date of this order”.

Meanwhile, the SEC’s statement said that Shipchain executives “have decided to cease all operations” as “the penalty represents essentially the entire net worth of Shipchain”.

Do you agree to the SEC fees and penalties imposed on Shipchain? You can share your views in the comments section below.

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