South Carolina Issues Cease-And-Desist Order to Blockchain Startup for Statutes Violation

Published at: May 23, 2018

On May 21, blockchain startup ShipChain was issued a cease-and-desist order from the South Carolina Attorney General's Office for violating the state’s securities statutes.

According the official notice, the company continuously offered investment opportunities to residents of South Carolina on its platform through its corresponding tokens, both on its website and at in-person events in South Carolina. ShipChain was allegedly unregistered with the Securities Division of the Office of the Attorney General of the State of South Carolina as a broker-dealer. The order stated:

“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... At no time relevant to the events stated herein were the securities at issue registered with the Division or federal covered securities, and no exemption from registration has been claimed by the Respondent.”

ShipChain is an Ethereum-based platform, which provides shipment tracking services. According to its website, the company’s customers are allowed to pay either directly in tokens they hold, or buy tokens from ShipChain for booking freight.

The order requested the company to desist “transacting business” in the state. It also says that the company is “permanently barred from participating in any aspect of the securities industry in or from the State of South Carolina.” ShipChain has 30 days to request a hearing on the matter.

Earlier this month, the Texas State Security Board issued a cease-and-desist order to a Bitcoin (BTC) investment company that reportedly offered unregistered securities and made deceiving statements that mislead investors. The order stated that the company promoted different BTC investments programs guaranteeing “100% profits in 21 days” with no risk involved.

Yesterday, US and Canadian state and provincial securities regulators initiated a slew of investigations into suspicious crypto businesses. Securities regulators reportedly warned as many as 35 companies about violations of state securities laws with some cases resulting in cease-and-desist actions.

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