Shipchain is the name of the blockchain start-up which recently received a cease-and-desist order from the attorney general office of South Carolina. According to the attorney general office, the company has not abided by the securities rules and regulations. Clearly, the attorney general office is of the opinion that it is selling a security rather than just tokens. That is why they have received such order.
The securities Commissioner clearly stated that it is actually an investment contract and is not abiding by the rules and regulations of the same.
Violation by Shipchain:
According to the order which was issued to the company, it offers the investors with the investment opportunity and is not registered as a broker or dealer. As a result, it is not exempt from the rules and regulations pertaining to a broker or someone who sells securities.
On the other hand, the company considers itself as an Ethereum-based platform. It considers itself to be an ecosystem for tracking the shipment of various goods and services. Also, it is the member of blockchain and transport allowance. The other members of blockchain and transport alliance include major corporations like FedEx as well as JD.com.
Impact of the order:
ShipChain will not be able to conduct any transacting business and neither it will be able to participate in any kind of securities-related transaction in South Carolina if the order is finalized. The start-up has got 30 days to respond to the order. It will be able to present its own side within 30 days. If it is not able to offer its own explanation, it will be very difficult for it to avoid the order.
On its part, the company stated that it is working with its legal department to respond to the order which has been received.
However, the price of the token dropped significantly by almost 39% after the news broke out. As a result, investors are actually terrified and do not have complete confidence that the company will be able to avoid the order. It remains to be seen whether it is able to give a satisfactory response within 30 days or whether it is slapped with the final order. For now, however, it seems like the attorney general office of South Carolina has the upper hand as the company had indeed sold the tokens which can be considered as an investment opportunity.