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As lawyer, I pride myself of my ability to wordsmith; like most lawyers, I cannot resist marking up a draft even if it is only just stylistic changes. But sometimes, there is just no way to improve on someone else’s words. 

The SEC yesterday charged ShapeShift with operating as an unregistered securities dealer from 2014-2021 (the alleged infractions end in 2021 because Shapeshift changed its business model then, becoming a decentralized platform and dissolving its corporate structure, so this action also has an undertone of closing barndoors after the equines have gone offshore in search of a more reasonable regulatory regime). ShapeShift agreed to settle and pay a $275,000 fine without admitting or denying the SEC’s findings. Understandable, because $275,000 is a fraction of what the legal fees to fight the SEC would be. 

Commissioners Peirce and Uyeda wrote a blistering dissent titled “On Today’s Episode of As the Crypto World Turns: Statement on ShapeShift AG.” It is great reading and I encourage you to click on the link. In case you don’t have time, here is my favorite part, addressing the SEC’s “Just come in and register” mantra:

Future ShapeShift (“FSS”): Hello, I would like to register as a dealer.

SEC: Why?

FSS: Because I think some of the assets that I plan to deal might be deemed at some point by the SEC to be securities.

SEC: Which ones?

FSS: I’m not sure because I can’t really understand what criteria you use to decide whether a token offering is a securities transaction and, if it is, whether the token that was the subject of the investment contract remains a security in secondary market transactions.

SEC: Well, if you don’t know whether you’re dealing in securities, you can’t register. And by the way, if some of the assets you’re dealing in are not securities, you also can’t register.

FSS: So, can you help us think through which assets are securities?

SEC: No. We suggest that you read the 2017 DAO report, and it will all be clear to you. You can also look at our enforcement actions if you want.

FSS: I read it, and I’ve read about your enforcement actions. I still have questions.

SEC: Hire a lawyer.

FSS: I did, and the lawyer has even more questions.

SEC: Sorry, we cannot help any more than we already have. We don’t give legal advice.

                                                                                                                                           END SCENE

I can’t do any better than that.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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Anthony Tu-Sekine | Partner

As the head of Seward & Kissel’s Blockchain and Cryptocurrency Group and a frequent commentator on all things crypto, Anthony advises clients on a wide range of evolving topics, including how to structure and issue security and utility tokens, registered and unregistered offerings of security tokens, token custody, transfer and liquidity issues, non-security opinions, and investments in crypto assets by funds and other investors. A recognized leader on physical precious metals funds, Anthony represented APMEX Inc. and alternative asset manager Sprott Inc. in connection with the launch of OneGold.com, which allows investors to own gold documented on blockchain. He also:

  • Represents ShelterZoom, a leading blockchain-based SaaS contract management platform;

  • Helped form a tokenized hedge fund;

  • Provides advice in connection with ransomware payments made in cryptocurrencies; and

  • Worked with sponsors of bitcoin ETF and OTC products.

“You can work with regulators or you can really try to piss them off… If you really want to do the latter, then you should expect that they will bring every tool they have against you.”
Anthony’s thoughts on BitMEX indictment, as published in Law360 article “BitMEX Case Seen as Blessing in Disguise for Crypto Sector”