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ShapeShift settles with SEC over alleged violations

TL;DR

  • ShapeShift settles with SEC over alleged violations, agreeing to pay a $275,000 penalty.
  • Transitioned to a decentralized model but still faces regulatory uncertainties.
  • Pro-crypto SEC commissioners raise concerns about ambiguity in regulatory stance.

Cryptocurrency exchange ShapeShift has reached a settlement with the United States Securities and Exchange Commission (SEC) regarding alleged violations of securities laws. The settlement comes after ShapeShift submitted an offer accepting the SEC’s order to cease and agreeing to pay a penalty.

ShapeShift, an online platform described as a crypto “vending machine,” facilitated cryptocurrency trades from 2014 to January 2021, serving as the “market maker” and counterparty. The SEC alleged that ShapeShift’s operations involved purchasing and selling crypto assets, some classified as securities under relevant laws.

Allegations and settlement

The SEC order accused ShapeShift of engaging in activities that violated the Securities Exchange Act of 1934 and the Howey test. Despite being incorporated in Switzerland and headquartered in Colorado, ShapeShift faced scrutiny for its operations, allegedly allowing it to profit from the price spreads on trades.

ShapeShift agreed to pay a penalty of $275,000 to resolve the allegations. Notably, the SEC order acknowledged ShapeShift’s transition into a decentralized autonomous organization (DAO) in 2021, coinciding with the dissolution of its corporate entity. 

ShapeShift’s founder, Erik Voorhees, attributed this transition to evolving regulatory pressures, stating that the exchange had “outsourced the regulated activity to an immutable decentralized protocol.”

ShapeShift’s response and future operations

Despite the settlement and dissolution of its corporate entity, ShapeShift’s DAO continues to operate at the same web address, maintaining the functionality of its platform. Additionally, the FOX token, originally introduced by ShapeShift in November 2019, is still actively traded. While ShapeShift emphasized the transition to a decentralized model, regulatory uncertainties persist in the crypto landscape.

Hester Peirce and Mark Uyeda, two SEC commissioners known for their pro-crypto stance, issued a joint statement regarding the settlement. They pointed out that the SEC’s allegations did not suggest any harm to ShapeShift’s customers, emphasizing that transactions were voluntary. Peirce and Uyeda expressed concerns about the ambiguity of the SEC’s regulatory stance, highlighting the need for clarity in navigating the regulatory landscape.

Analysis and market impact

Despite the settlement, ShapeShift’s FOX token experienced significant fluctuations in value. While it reached a peak price of $1.68 in March 2021, its current trading price stands at $0.09, with a market capitalization of $38.9 million. 

The settlement’s impact on ShapeShift’s reputation and market position remains to be seen, as regulatory compliance continues to be a key consideration for cryptocurrency exchanges.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Ibrahim Abdulaziz

A fervent advocate, Ibrahim shares his wealth of knowledge on crypto and blockchain technology in an engaging and informative style. He frequents places where influencers gather for his next scoop. His vision is that the decentralized nature, security features, and potential for financial inclusion will drive widespread massive crypto adoption.

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