U.S. SEC Fines $ 2 Million for Holding Unregistered Ticket Offer: Company Agrees to Stop Operations

The U.S. Securities and Exchange Commission (SEC) has issued an expiration and abstention order against Shipchain and ordered to pay a penalty of $ 2.05 million. In addition, the regulator has instructed Shipchain, a shipping and logistics company, to transfer Ship tickets owned or controlled by the company’s directors to a “fund administrator.”

Unregistered Token Auction

In a statement announcing the cease and desist order, the SEC claims that Shipchain, which “promoted its company and the ICO through various media,” raised $ 27.6 million of pre-sales held toward the end of 2017 and early 2018. The regulator explains:

In total, Shipchain sold about 145 million Ship tickets to over 200 people or groups of people, including US people, for about $ 27.6 million (including fiat currency and digital assets, such as Bitcoin or Ether, priced) at the time of admission).

The SEC requires that “ticket buyers have a reasonable expectation of profit based on Shipchain’s efforts.” This expectation, as well as Shipchain’s numerous promises to buyers, mean that the Ship ticket sale has reached the threshold of a security offer. And yet according to the SEC:

Shipchain’s offer and sale of Ship tickets were not registered with the Commission, and Shipchain’s offer and sale of Ship tickets did not meet any valid exemption from registration.

Accordingly, the regulator states that the pre-sale Ship ticket violated Section 5 (a) and 5 (c) of the Securities Act that prohibits applying for funding without registration and approval by the SEC.

Shipchain Stop All Operations

In the meantime, Shipchain has agreed to cooperate with the SEC by committing to assist in the permanent disablement of Shipping tickets. The company has also agreed to publicize the cease and desist order on its website and through the company’s social media channels “within 10 days of the date of this Order.”

Meanwhile, the SEC statement notes that Shipchain executives have “decided to cease all operations” because “the penalty represents almost all of Shipchain’s net assets.”

Do you agree with the SEC charges and penalties imposed on Shipchain? You can share your thoughts in the comments section below.

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