In the year ShapeShift — the cryptocurrency platform that disrupted operations in 2021 — has agreed to a cease-and-desist order and a $275,000 fine from the US Securities and Exchange Commission (SEC) for allowing users to trade digital tokens without registering them. Broker or exchange.
The settlement, announced Monday, resolves a years-long SEC investigation into alleged violations of federal securities laws by Shapeshift.
The SEC's case focuses on ShapeShift's operations between July 2017 and November 2019, when the former crypto exchange allegedly facilitated the purchase and sale of digital assets that were investment contracts and therefore ShapeShift did not properly register documents to sell.
“The crypto assets offered by ShapeShift are offered and sold as investment contracts and, therefore, include securities,” the SEC said. “ShapeShift is not registered as a vendor with the Commission, nor is it operated under any special conditions or exemptions from registration.”
Although ShapeShift is now defunct, the SEC says it was once a very active player in the crypto space.
“At its peak, the ShapeShift platform allowed customers to exchange at least 79 crypto assets,” the federal regulator asserted. “ShapeShift acts as a market maker for these assets, marketing itself as a crypto ‘selling machine' as a counterparty to each transaction.
In the year Founded in 2014 by CEO Eric Voorhees, ShapeShift is incorporated in Switzerland and operates out of Denver, Colo. The exchange first allowed customers to buy and sell digital assets without creating an account and providing personal information – a policy known as “no-KYC”. ” (Know Your Customer) is part of standard anti-money laundering (AML) measures in the financial industry.
However, this approach has been investigated. In the year In November 2018, as part of a wider investigation into the criminal use of cryptocurrencies, the Wall Street Journal reported that ShapeShift had siphoned more than $9 million from suspected criminal entities over a two-year period — more than transactions with US bureaus.
That same month, ShapeShift canceled privacy coins Monero, Dash, and Zcash—a move it admitted was prompted by regulatory pressure—and launched its own token. This happened after the exchange upgraded its business model earlier that year to become a decentralized service and favor open source principles that do not hold digital assets on behalf of its clients.
“ShapeShift was a marketplace creator and enabler of user transactions to enable exchanges,” Voorhees explained in a blog post at the time. “This makes us classified as a ‘financial institution', and almost makes us subject to regulations. In my view they clearly constitute an unreasonable search that is inconsistent with protecting users' privacy and security interests.
In the year On July 14, 2021, ShapeShift announced that it was dissolving its corporate entity, the SEC said, adding that the company currently has no revenue or full-time employees.
Although no longer active, ShapeShift resurfaced in the national policy debate on crypto last year when Senator Elizabeth Warren invoked its name when she introduced a bill that would strengthen regulations in the digital asset space.
“Some in the crypto industry say that anti-counterfeiting laws can work as long as the so-called decentralized entities are not outlawed … In other words, they want a big loophole in the law for DeFi to be able to launder money while on drugs. A master or terrorist pays them to do it,” Warren said. . “That's exactly what Colorado-based crypto exchange ShapeShift did when it deliberately positioned itself as a DeFi platform.”
The senator described the ad as an invitation to “provide your money here.”
ShapeShift pushed back.
“ShapeShift never holds users' money, so it has no ability to facilitate this,” the company tweeted. “ShapeShift is not an exchange.”
Ironically, we care about the same things as Senator Warren: user safety (need to protect yourself). [and] Finding innovation (DeFi not CeFi),” ShapeShift continued. “We also care about common sense and believe in building products that enable financial freedom for people around the world.”
Today, ShapeShift is a browser-based crypto wallet provider that bills itself as MetaMask's best multichain experience.
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