ShipChain, the blockchain-based logistics startup that launched the SHIP symbol to facilitate transactions on its platform, is closing its doors.
In a recent announcement, the company said that as a result of a payment of more than $ 2 million to the Securities and Exchange Commission, ShipChain “is now short of funds to continue its business. Consequently, ShipChain Inc. made the difficult decision to stop operations and is now closing its business. “
In the announcement, ShipChain said it was cooperating with the SEC on the status of the SHIP token. The initial coin offering (ICO) that put the SHIP symbols in circulation at the end of 2017 was actually a sale of securities that had not been registered with the SEC. That investigation, ShipChain said in its statement, concluded that the sale of the tokens required registration.
To settle the charges, ShipChain will pay the SEC $ 2.05 million. The money will be used to create a Fair Fund, a creation administered by the SEC and authored by the Sarbanes-Oxley Act of 2020, which disburses payments to people who have a complaint against the unregistered sale of SHIP symbols.
According to the agreement document, ShipChain raised $ 27.6 million in its ICO, selling more than 145 million tokens.
Based on what ShipChain management was telling buyers of the tokens, “SHIP tokens were offered and sold as investment contracts and therefore bonds,” said the settlement document, citing other legal precedents that established what constituted a unregistered sale of securities. “A buyer in the SHIP token offering would have a reasonable expectation of making a future profit based on ShipChain’s representations and efforts to build its business.”
ShipChain’s plans were to build a transportation and logistics platform based on Ethereum’s blockchain technology, which is the preferred blockchain technology for such applications. The much better known bitcoin platform is a digital currency, with blockchain-driven bitcoin sales. But its platform is not considered suitable for hosting real applications, unlike Ethereum.
“ShipChain has disclosed the potential impact of its platform on the transportation and logistics sector and the need for ownership of the SHIP symbol to participate in any capacity on the platform,” said the agreement document.
The plan that investors heard is that the ICO funds would be used to build the platform. As noted in the settlement document, the platform was not installed and functioning at the time of the ICO.
The ShipChain platform has made some progress. Last summer, it launched Mainnet, a blockchain protocol that would allow users to transact on a less congested platform than Ethereum. “A big part of the Mainnet launch is the ability for others to develop on top of the platform,” said the company in a blog post at the time of launch. “Other developers are welcome and encouraged to build on ShipChain, further enhancing its usefulness for end users.”
ShipChain was founded by John Monarch. Its history has always been rocky; in the summer of 2018, South Carolina, where the company was based, issued an order to cease and desist on the same matter that ended up bankrupting the company by the SEC: the claim that the sale of the SHIP token was an act not licensed security sale.
Part of the work done can be leveraged, the company said in announcing its closure. “The substantial work we have done … is open source, and therefore we can, we hope, help to accelerate this path of innovation,” he said.
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