On May 21, the South Carolina Attorney General’s Office sent a cease-and-desist order to blockchain startup ShipChain. The official notice stated that the company has violated securities statutes in South Carolina.
ShipChain provides package tracking services using their Ethereum-based platform. Those who use the service are allowed to pay in digital currencies, including the company’s own token.
And their token is where the problems arise.
According to the attorney general, ShipChain had repeatedly offered investment opportunities to individuals in South Carolina online and in person. These opportunities were related to the company’s token. Since ShipChain is not registered with the Securities Division Office of the Attorney General of the State of South Carolina, this meant that the company was breaking the law. As explained in the official order:
“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.”
The cease-and-desist order goes beyond merely instructing the business to stop operating in the state; it actually bans the company from ever “participating in any aspect of the securities industry in or from the State of South Carolina.” Should ShipChain not contest the order within 30 days, it will be permanently in effect.