Cryptocurrency exchange ShapeShift has offered a settlement to the United States Securities and Exchange Commission (SEC), agreeing to comply with the agency’s order to stop its activities and pay a fine. The exchange had already ceased its operations in 2021 when it transitioned into a decentralized autonomous organization (DAO).
According to the SEC, ShapeShift operated an online platform that functioned like a crypto “vending machine” from 2014 until January 2021. During this time, ShapeShift acted as both the market maker and counterparty for trades, earning revenue from the price difference on these trades. The SEC determined that some of the assets offered by ShapeShift qualified as securities under the Securities Exchange Act of 1934 and the Howey test. As a result, ShapeShift has agreed to pay a $275,000 penalty for its actions.
In the SEC order, it was stated that ShapeShift was incorporated in Switzerland and based in Colorado for several years. At its peak, the exchange offered at least 79 assets. However, the SEC’s definition of securities applied to some of these assets. The order also noted that ShapeShift currently has no revenue or full-time employees, as it dissolved its corporate entity in July 2021. The exchange made its operations open-source and decentralized at the same time.
ShapeShift introduced the FOX token in November 2019, which allowed users holding FOX to trade without paying fees. In 2021, the token was transformed into a governance token, and ShapeShift announced plans for the biggest airdrop in history.
ShapeShift founder Erik Voorhees briefly acknowledged the regulatory pressure in a blog post, mentioning that the regulatory environment had changed.
Despite the settlement with the SEC, ShapeShift’s DAO continues to operate on the same website as the dissolved exchange, and the FOX token is still being traded. The token reached its peak price of $1.68 in March 2021 and currently trades at $0.09 with a market cap of $38.9 million.
SEC commissioners Hester Peirce and Mark Uyeda released a joint statement regarding the ShapeShift settlement, expressing their views on the regulatory ambiguity surrounding the SEC’s stance. They used an ironic and hypothetical dialogue between Future ShapeShift and the SEC to highlight the untenability of the SEC’s position.
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Source: Eleanor Terrett on X Magazine – “The reformed Bitcoin Maxi who saw the light: Erik Voorhees”