Initial coin offering projects are of great interest to regulators and other watchdogs these days. This is mainly because a fair few of these projects violated securities laws and expected to get away with it. In the case of ShipChain, the project was hit with a cease and desist letter this week for violating South Carolina’s securities laws.

ShipChain ICO bites the Dust

It has become apparent that a fair few initial coin offerings may have violated securities laws when issuing and distributing their tokens. Since most ICO tokens can be considered securities under the current regulatory guidelines, cease and desist letters are issued on a regular basis. Various projects have faced this problem in the past, and it seems that situation will not change anytime soon.

As for ShipChain, the company is in the crosshairs of South Carolina’s Office of the Attorney General. At the behest of the state’s Securities Commissioner, the company has been forced to halt all activity. It seems the issuance of its ICO tokens has been considered a violation of securities law and will spell legal trouble down the line.

Based on information shared with the public, the ShipChain ICO should have contacted the proper authorities in South Carolina. Its failure to do so resulted in the company issuing securities without an official license, which irked the state’s regulators. These securities violated S.C. Code Ann. 35-1.301.

Under the cease and desist order, ShipChain is no longer able to transact business in the state of South Carolina. Additionally, the company and all of its participants and promoters have been barred from participating in any aspect of the securities industry in the state. Moreover, the company’s exemptions from registration with the Division have been permanently revoked.

As such, the ShipChain company will need to either fold or register with the regulatory authorities in South Carolina. The latter approach may not necessarily result in having the cease and desist order rescinded, however. It will be interesting to see how this plays out, as ShipChain’s investors will not be too pleased with the way things are going.

It is possible that ShipChain will face additional cease and desist orders in other US states. The fact that the company’s initial coin offering wasn’t limited to South Carolina could lead to a lot more regulatory trouble down the line. So far, the company has not issued any official response to the cease and desist order, but it is evident the project has very few options left on the table.