The South Carolina Attorney General’s office just hit ShipChain, a blockchain startup, with a cease and desist order. They claim the company had violated the state’s securities statutes.
In an order issued Monday, South Carolina’s Securities Commissioner said that ShipChain offered what amounted an investment contract by way of its token, which appears to be the only medium of exchange on the platform.
The order continued that:
“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 touts itself as an ethereum-based platform for tracking shipments. It is a member of the Blockchain in Transport Alliance, which also counts FedEx and JD.com among its members.
If the order is finalized, it would bar ShipChain from conducting in the state. The startup has 30 days to request a hearing, where it may contest the order and argue its token sales do not qualify as an unregistered securities offering.
ShipChain acknowledged the order in a tweet and noted it was working on a formal response.
ShipChain saw it’s publicly traded stock take a steep drop Tuesday, with it trading at $0.065, down 39 percent compared to yesterday.