- Shapeshift has agreed to pay a $275,000 settlement to the SEC for allegedly selling securities
- Founded by Erik Voorhees in July 2014, Shapeshift acted as a market-maker, positioning itself as a crypto “vending machine”
- The project switched to a DAO in 2021 to avoid collecting customer information, with charges stemming from its cryptocurrency operations.
Crypto exchange Shapeshift has agreed to pay a $275,000 settlement to the US Securities and Exchange Commission (SEC) over the alleged sale of securities. Founded by Erik Voorhees in July 2014, Shapeshift acted as a market-maker, positioning itself as a crypto “vending machine,” serving as the counterparty to each transaction. The project switched to a DAO in 2022 to avoid the legal requirement to collect customer information, with the charges stemming from its cryptocurrency operations up to that point. In the settlement, Shapeshift did not admit to the charges.
Shapeshift’s Changes Not Enough to Save It
During its operational peak, Shapeshift.io enabled users to exchange a wide array of crypto assets, totaling at least 79 different types. In a filing published yesterday, the SEC claimed that among the crypto assets traded were those classified as securities under the Securities Exchange Act of 1934, which includes the Howey Test.
Shapeshift introduced Know Your Customer protocols in 2018 in order to fall in line with local regulations, necessitating the capture of personal information from users. However, a little over two years later it announced a plan to decentralize, negating this requirement.
In July 2021 the exchange formalized this plan by announcing a decision to transition to a DAO in 2022, announcing at the same time that it would cease acting as a counterparty to customer transactions and would essentially cease functioning as a crypto-swap platform.
Shapeshift has agreed to the terms set forth by the SEC, consenting to a cease-and-desist order. While not admitting or denying the SEC’s findings, the company has accepted the penalty of $275,000 for violating Section 15(a) of the Securities Exchange Act of 1934.
