Cryptocurrency exchange ShapeShift has submitted a settlement offer to the United States Securities and Exchange Commission (SEC), agreeing to comply with the agency’s order to cease its operations and pay a penalty. ShapeShift converted into a decentralized autonomous organization (DAO) in 2021, which led to the cessation of the operations in question.
The SEC alleges that ShapeShift operated an online platform similar to a crypto “vending machine” from 2014 to January 2021. Acting as the “market maker” and counterparty for trades, ShapeShift generated revenue from the price spread. The SEC defines some of the assets offered by ShapeShift as securities under the Securities Exchange Act of 1934 and the Howey test. As a result, ShapeShift has agreed to pay a penalty of $275,000.
According to the SEC order, ShapeShift was incorporated in Switzerland and had its headquarters in Colorado for a number of years. At its peak, the exchange offered at least 79 assets. However, the SEC states that ShapeShift currently has no revenue or full-time employees. In July 2021, ShapeShift dissolved its corporate entity and made its operations open-sourced and decentralized.
In November 2019, ShapeShift introduced the FOX token, which allowed users to trade without fees. In 2021, the token became a governance token, and ShapeShift promised to hold the largest airdrop in history with it.
ShapeShift founder Erik Voorhees briefly acknowledged the regulatory pressure in a blog post, stating that the regulatory climate had evolved. Despite the dissolution of the exchange, the ShapeShift DAO continues to operate at the same web address, and the FOX token is still being traded. The token reached a peak price of $1.68 in March 2021 and is currently trading at $0.09 with a market cap of $38.9 million.
SEC commissioners Hester Peirce and Mark Uyeda released a joint statement on the ShapeShift settlement, highlighting the ambiguity of the SEC’s regulatory stance. They presented an ironic dialogue between Future ShapeShift and the SEC to emphasize the untenable nature of the regulatory environment.
Source: Eleanor Terrett on X
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