SEC Accepts ShapeShift’s $275,000 Settlement Over Crypto Securities Charges

The U.S. Securities and Exchange Commission (SEC) has finalized its actions against cryptocurrency platform ShapeShift by accepting a $275,000 settlement.

In a detailed filing, the SEC outlined that ShapeShift, previously operating out of Denver, Colorado, had offered its customers at least 79 crypto assets, some of which were determined to be unregistered securities.

ShapeShift’s $275,000 Settlement with SEC

According to the filing, ShapeShift is required to pay a civil penalty of $275,000 to the SEC within 14 days following the issuance of this Order.

Besides the financial penalty, ShapeShift agreed to “cease and desist from committing or causing any violations and any future violations” as a part of the settlement, marking an end to its direct exchange operations within the U.S. since 2021.

The SEC classified certain ShapeShift offerings as unregistered securities based on the Howey Test, a criterion established by the Supreme Court in 1946.

This Howey Test determines whether a transaction qualifies as an investment contract and therefore should be considered a security under U.S. law.

The filing specifically mentioned that the crypto assets listings by ShapeShift were “offered and sold as investment contracts,” thereby meeting the criteria.

ShapeShift founder Erik Voorhees posted on social media to clarify a few points regarding the settlement, saying, “FOX is not a security, and nothing in the SEC settlement suggests otherwise.”

FOX is not a security, and nothing in the SEC settlement suggests otherwise.

ShapeShift DAO and https://t.co/SV3H3QwzVV are unaffected.

Open-source
Permissionless
Private

— Erik Voorhees (@ErikVoorhees) March 6, 2024

“ShapeShift DAO and ShapeShift.com are unaffected,” said Voorhees.

U.S. Court Rules Crypto Trades on Secondary Markets as Securities

The U.S. District Court for the Western District of Washington recently ruled that trading crypto assets on secondary markets constitutes securities transactions.

This decision emerged from the “first ever cryptocurrency insider trading” case implicating Ishan Wahi, a former Coinbase product manager, alongside his brother Nikhil Wahi and associate Sameer Ramani.

The court’s document stated, “the tokens in which Ramani traded were investment contracts and, therefore, securities, because each involved the investment of money, in a common enterprise, with a reasonable expectation of profit derived from the efforts of others.”