A few days ago, a supply chain startup called ShipChain was hit with a cease-and-decease order by the state of South Carolina. The legal action was due to the fledgling business allegedly offering investment opportunities via digital currency to the state’s residents despite not having the proper papers to do so.

Now, the startup has made its reply and claims it was unaware that their tokens were being proffered in such regard. Econotimes has reported that they can dispute the order by claiming they do not consider their tokens as securities, which is exactly what the startup did.

The startup was disappointed that the state of South Carolina didn’t contact them about the issue and hastily slapped the cease-and-decease order without informing the company’s developers. In a statement released by ShipChain, it said that if the South Carolina’s Securities Commissioner had exchanged dialogue with the company then they would’ve shown evidence that they were conducting business consistent with what their registration required.

"Our software development team is in South Carolina and since January we have not been offering, issuing, or selling tokens, and already had no plans to do so for the foreseeable future. Therefore, we are confident that there is no way for this to occur,” said John Monarch, ShipChain’s chief executive.

ShipChain further explained that it only sold tokens to certified investors, and those who purchase the tokens in their first sale weren’t even citizens or businesses residing in South Carolina. Developments are still underway regarding this legal action but if the order goes through it will bar the startup from “participating in any aspect of the securities industry in or from the State of South Carolina."

Blockchain’s expansion has spawned a lot of businesses centered on the technology. And with it came illicit companies trying to take advantage of the nascent regulations surrounding it. In Texas, another company was hit with a cease-and-decease order after an investigation found that it lured investors with profit with a 100 percent guarantee of their investment.