The blockchain and logistics startup ShipChain received a cease-and-desist order from the South Carolina Office of the Attorney General, Securities Division. The order was signed on May 21 by Assistant Attorney General Taylor Faw, who requested its issue and is working under the authority of Alan Wilson, the state’s Attorney General and Securities Commissioner.

ShipChain promised a fully integrated end-to-end logistics platform that offers realtime visibility into shipments federated in “trustless, transparent blockchain contracts” powered by SHIP cryptocurrency tokens.  The cease-and-desist order relates to ShipChain’s failure to register as a security broker in South Carolina and its issuance of SHIP tokens. ShipChain had planned an initial coin offering (ICO), but sold out its $30M offering of SHIP tokens by January 6, 2018, when the pre-sale to accredited investors ended.

While ShipChain is a Delaware-based corporation, CEO John Monarch graduated from Clemson University, founded previous logistics businesses in South Carolina, and allegedly pitched SHIP as an investment opportunity to South Carolina residents at events in the state. ShipChain responded to the order in an official statement: “The order refers to ShipChain’s issuance of its “SHIP” tokens.

SHIPs are blockchain tokens that are one means of enabling transactions on ShipChain’s award-winning, innovative logistics platform. ShipChain does not believe that the tokens are securities.” There have been inklings that all was not as it seemed at ShipChain.

Reddit users YoungGentilhomme and waynekenoff1234 said they were banned from ShipChain’s Telegram for asking questions about the company’s revenue model. The ShipChain subreddit appears to be moderated in a somewhat heavy-handed fashion: redditors who asked questions about the company’s elaborate, intrusive know-your-customer requirements—which, as they pointed out, could be monetized by the company’s team of former online marketers—were berated and systematically downvoted.  Even as /r/ShipChain mods, including shipchain_sam (Sami Rusani, the Chief Revenue Officer, an LA-based talent manager), sought to carefully control any critical conversations about the ShipChain project, the company tolerated misinformation on its subreddit, as long as it was favorable. Read more from…

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