ShapeShift settles SEC securities payments on pre-DAO days

Cryptocurrency exchange ShapeShift has submitted a settlement offer to the United States Securities and Exchange Commission (SEC), accepting the agency's cease-and-desist order and agreeing to pay a fine. The exchange ceased operations in question in 2021 when the exchange transitioned into a decentralized autonomous organization (DAO).

According to the SEC charges, ShapeShift operated an online platform structured as a crypto “vending machine” from 2014 to January 2021. ShapeShift acted as a “market maker” and counterparty to the trades, allowing ShapeShift to earn revenue on the price spread across the trades. . According to the SEC order:

“ShapeShift buys the crypto asset the client wants to sell and sells the client the crypto asset the client wants to buy.”

ShapeShift is incorporated in Switzerland and has been headquartered in Colorado for several years. At its peak, ShapeShift offered at least 79 assets, of which the SEC determined as securities under the Securities Exchange Act of 1934 and the Howey test. ShapeShift agreed to pay a $275,000 fine for its actions.

“ShapeShift currently has no revenue or full-time employees,” the SEC order said. ShapeShift has announced the dissolution of its corporate entity in July 2021. At the same time, it has made its operations open source and decentralized.

ShapeShift created the FOX token in November 2019 and allows users who own FOX to trade free of charge. In the year In 2021, FOX made a management sign and promised to hold the biggest airdrop in history.

Related: ShapeShift Goes Fully Decentralized With Open Source Mobile App

ShapeShift only acknowledged in passing that it has regulatory pressure. Eric Voorhees, founder of ShapeShift, noted that the regulatory climate has improved at the time and wrote on his blog:

“We've transferred the regulated activity to an immutable decentralized protocol.”

The ShapeShift DAO continues to operate under the same web address as the collapse exchange and continues to trade the FOX token. FOX rose to a high of $1.68 in March 2021 and currently trades at $0.09 for a $38.9 million market cap.

Pro-crypto SEC Commissioners Hester Peirce and Mark Uyeda released a joint statement with the SEC on the ShapeShift settlement. They wrote:

“Specifically, the Commission does not allege any damages – ShapeShift and its customers traded voluntarily and the order nowhere alleges that ShapeShift defrauded its customers.”

Peirce and Uyeda created a “by no means hypothetical” dialogue between Future ShapeShift and the SEC to illustrate the ambiguity of the SEC's regulatory position, which is untenable.

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