In May, FreightWaves reported that the South Carolina Office of the Attorney General, Securities Division had issued a cease and desist order to ShipChain, a blockchain logistics startup headquartered in the state. Yesterday, the AG’s office entered a new order vacating, or canceling, the previous cease and desist order.
The initial cease and desist order alleged that ShipChain was acting as an unlicensed securities broker to South Carolina residents. ShipChain argued a lack of jurisdiction in a two pronged argument: the company maintained throughout the dispute that it did not believe its SHIP tokens were securities, and also said that the cryptocurrency was not marketed to or purchased by any South Carolina residents.
“Earlier today, the Office of the South Carolina Securities Commissioner concluded its inquiry into allegations that it had received against ShipChain regarding its token, and vacated its cease-and-desist order of May 21, 2018. The company fully cooperated with the inquiry. ShipChain is gratified by the Commissioner’s decision and looks forward to continuing to build its transformative global-logistics industry platform and its network of partnerships with the participants in that industry,” ShipChain wrote in a statement.
It appears that the cease and desist order was a rapid response to complaints—which turned out to be baseless—about ShipChain’s activities in South Carolina.
“In our regulatory function, we’re charged with proactively keeping the state’s securities markets as fair, safe, and efficient as possible,” the South Carolina AG’s office wrote to FreightWaves in an email. “To accomplish that mandate, the Securities Division often needs to act quickly and on the basis of activities which look a certain way. In this case, they saw activities which caused concern. They began investigating and, based on information uncovered, were concerned enough to issue an order to the company requesting they cease doing securities business in South Carolina until they came in and addressed our concerns. The company came in, provided the information we requested that satisfied our concerns, and the Division vacated the order.”
“We vacated the cease and desist order because good cause was shown,” wrote the South Carolina Attorney General’s office.
The cease and desist order was vacated without prejudice, meaning that no decision has been made about whether the SHIP token is a security or not.
Genesis Mining, a cloud-based cryptocurrency mining platform, also had a cease and desist order vacated by the Securities Division of the South Carolina AG’s office.
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