While the crypto community is happy that Bitcoin hit a new all-time high on March 5, crypto platform ShapeShift is not having a good time.
The US Securities and Exchange Commission (SEC) announced that ShapeShift had agreed to pay a $275,000 fine to settle accusations of facilitating crypto trading while failing to register as a broker or exchange.
Related: Gary Gensler: The Man Behind SEC
Today, ShapeShift is promoting itself as a multi-chain crypto trading platform operated by a decentralized autonomous organization (DAO). Still, it has a team behind it that is based in Switzerland.
The platform was founded in 2014 by CEO Erik Voorhees, a vocal crypto entrepreneur with over 670k followers on X.
Previously, ShapeShift was run from Denver, Colorado, but in 2021, it ceased operations on the US territory. Despite being a defunct company in the US, the SEC insisted on its accusations, claiming that it was once an active player in the crypto space. The regulator said:
At its peak, the ShapeShift platform allowed customers to effect exchanges of at least 79 crypto assets. ShapeShift acted as a market maker for these assets by serving as the counterparty to every transaction, marketing itself as a crypto ‘vending machine.’
At the time, the platform allowed users to buy and sell crypto assets without registering an account and passing through the standard KYC (know your customer) procedure. It acted very much like a decentralized exchange (DEX) in terms of user experience – something that US regulators couldn’t let happen on their watch.
The SEC claimed that ShapeShift had accepted paying the fine and settling the SEC allegations. However, CEO Erik Voorhees took on to X to explain that the platform paid $275,000 to settle the matter without necessarily admitting any wrongdoing.
The regulator started an investigation many years ago, concluding that the platform violated federal securities laws. Many of the listed digital assets were considered securities by the SEC, which automatically requires platforms to register with it as a securities dealer. The regulator stated:
The crypto assets offered by ShapeShift included those that were offered and sold as investment contracts and, therefore, securities. ShapeShift never registered as a dealer with the Commission or operated pursuant to any exception or exemption from registration.
ShapeShift Faced Money Laundering Accusations
In 2018, the Wall Street Journal (WSJ) claimed that ShapeShift had facilitated over $9 million worth of money laundering. In an article titled “How Dirty Money Disappears Into the Black Hole of Cryptocurrency,” WSJ authors unveiled thousands of wallets involved in illicit trade.
More than nine million of the total of 88 million USD was laundered through ShapeShift, the investigation claimed. In response, a report by CipherBlade concluded that the WSJ accusations were false, as they used wrong methodologies and made inaccurate assumptions.
ShapeShift’s struggles are a good example of how difficult it is to run a crypto business in an environment defined by regulatory vagueness.
More Info:
- Binance Suffers Serious Setbacks in the US Due to SEC Legal Battle
- SEC to Refrain from Approving Ethereum ETFs this Year, Crypto Lawyer Says
Despite its latest struggles with the SEC, ShapeShift’s FOX token has been following the general bullish trend at the beginning of 2024, gaining over 150% since the beginning of February.
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