UNITED STATES OF AMERICA

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING

File No. 3-20185

In the Matter of

ShipChain, Inc.,

Respondent.

I.

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PROPOSED PLAN OF

DISTRIBUTION

OVERVIEW

1.

The Division of Enforcement submits this Proposed Plan of Distribution (the

“Plan”) to the United States Securities and Exchange Commission (the “Commission”) pursuant

to Rule 1101 of the Commission’s Rules on Fair Fund and Disgorgement Plans (the

“Commission’s Rules”), 17 C.F.R. § 201.1101. This Plan provides for the distribution of a Fair

Fund (the “Fair Fund”) comprised of civil money penalties paid by ShipChain, Inc. (the

“Respondent”) in the above-captioned matter.1

2.

As described more specifically below, the Plan seeks to compensate investors

who were harmed by the Respondent’s conduct as described in the Order, in connection with

investments in unregistered crypto assets. Based on information obtained by the Commission

staff during its investigation and the review and analysis of applicable records, the Commission

staff has reasonably concluded that it has all records necessary to identify harmed investors. As

a result, the Fair Fund is not being distributed according to a claims-made process, so procedures

for making and approving claims in accordance with Rule 1101(b)(4) of the Commission’s

Rules, 17 C.F.R. § 201.1101(b)(4), are not applicable.

3.

As calculated using the methodology detailed in the Plan of Allocation (attached

as Exhibit A), investors will be compensated on their losses on their purchases of unregistered

crypto assets known as “SHIP tokens” (the “Security”) in the “pre-sale” phase of the initial coin

offering (“ICO”) from October 1, 2017 through January 3, 2018, inclusive (the “Relevant

Period”).

4.

In the view of the Commission staff, this methodology constitutes a fair and

reasonable allocation of the Fair Fund.

1

See Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making

Findings, and Imposing Penalties and a Cease-and-Desist Order, Securities Act Rel. No. 10909 (Dec. 21, 2020) (the

“Order”).

5.

The Commission has custody of the Fair Fund and shall retain control of the

assets of the Fair Fund. The Plan is subject to approval by the Commission, and the Commission

retains jurisdiction over its implementation.

II.

BACKGROUND

6.

On December 21, 2020, the Commission issued the Order against the Respondent

and found that from late 2017 to early 2018, ShipChain raised approximately $27.6 million by

selling more than 145 million digital assets, “SHIP tokens,” in an ICO. ShipChain told investors

that it would use the funds raised in the ICO to develop a blockchain platform. The Commission

found that SHIP tokens were offered and sold as investment contracts and were, therefore,

securities. ShipChain violated Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities

Act") by offering and selling these securities without having a registration statement filed or in

effect with the Commission or qualifying for exemption from registration with the Commission.

The Commission ordered the Respondent to pay a $2,050,000 civil money penalty to the

Commission. The Commission also created the Fair Fund, pursuant to Section 308(a) of the

Sarbanes-Oxley Act of 2002, so the civil penalty paid can be distributed to harmed investors.

7.

The Respondent has paid in full. The Fair Fund has been deposited in a

Commission-designated account at the United States Department of the Treasury, and any

accrued interest will be added to the Fair Fund.

III.

DEFINITIONS

As used in this Plan, the following definitions will apply:

8.

“Administrative Costs” shall mean any administrative costs and expenses,

including without limitation tax obligations, the fees and expenses of the Tax Administrator and

the Fund Administrator, bond premium expenses, and investment and banking costs.

9.

“Certification Date” means the date established in accordance with this Plan by

which a Preliminary Claimant’s Certification Form must be postmarked or submitted

electronically in order to receive consideration under the Plan. The Certification Date shall be

sixty (60) days from the mailing of the Plan Notice.

10.

“Certification Form” means the form that will be emailed or mailed to each

Preliminary Claimant. The Certification Form will require confirmation of the name and mailing

address of the payee to which a Distribution Payment should be issued. The Certification Form

will also require confirmation of the Recognized Loss listed in the Plan Notice. If the

Preliminary Claimant disputes the amount of Recognized Loss listed in the Plan Notice, the

Preliminary Claimant should follow the Dispute Provision in paragraph 52. The Certification

Form will require sufficient documentation reflecting any Preliminary Claimant’s purchases of

the Security including the purchase agreement and evidence of payment(s). The Certification

Form will also require disclosure of any payments or compensation received in connection with

the Security. The Certification Form will require tax identification information form the

Preliminary Claimant and a certification that the Preliminary Claimant is not an Excluded Party.

2

The Certification Form will require the Preliminary Claimant to either certify that he, she or it

purchased the Security on an individual basis or made the investment as a member of a larger

group of investors. If the Preliminary Claimant was a member of a group that made an

investment in the Security, additional information may be required by the Fund Administrator

regarding the group investment. The Certification Form may be accompanied by tax forms, as

required, relating to the tax treatment of any distribution.

11.

“Determination Notice” means the notice sent by the Fund Administrator within

forty-five (45) days of the Certification Date to all Preliminary Claimants that submitted a

deficient Certification Form. The Determination Notice will provide to each Preliminary

Claimant whose Certification Form is deficient, in whole or in part, the reason(s) for the

deficiency and in the event the claim is denied, the Determination Notice will state the reason(s)

for such denial. The Determination Notice will also notify the Preliminary Claimant of the

opportunity to cure any deficiency, request reconsideration, or dispute the determination made by

the Fund Administrator and provide instructions regarding what is required to do so.

12.

“Distribution Payment” means a payment from the Fair Fund to a Payee in

accordance with the terms of this Plan.

13.

“Eligible Claimant” means a Preliminary Claimant, who is determined to have

suffered a Recognized Loss, pursuant to the Plan of Allocation, and who is not an Excluded

Party or an Unresponsive Preliminary Claimant.

14.

“Excluded Party” means: (a) the Respondent, or Respondent’s advisers, agents,

nominees, assigns, creditors, heirs, distributees, spouses, parents, children, or controlled entities;

(b) the Fund Administrator, its employees, and those Persons assisting the Fund Administrator in

its role as the Fund Administrator; and (c) any purchaser or assignee of another Person’s right to

obtain a recovery from the Fair Fund for value; provided, however, that this provision shall not

be construed to exclude those Persons who obtained such a right by gift, inheritance or devise.

15.

“Fair Fund” means the fund created by the Commission pursuant to Section

308(a) of the Sarbanes-Oxley Act of 2002, for the benefit of investors harmed by Respondent’s

violations described in the Order.

16.

“Final Determination Notice” means the written notice sent by the Fund

Administrator to (a) all Preliminary Claimants who timely submitted a Certification Form,

notifying the Preliminary Claimants of the Fund Administrator’s eligibility determination, (b)

any Preliminary Claimant who timely submitted a written dispute of his, her, or its calculated

Recognized Loss notifying the Preliminary Claimant of its resolution of the dispute; and (c)

those Preliminary Claimants who have not responded to the Plan Notice by returning a

Certification Form and/or other requested documentation as described in paragraphs 45-47

notifying the Preliminary Claimant that he, she, or it has been deemed an Unresponsive

Preliminary Claimant. The Fund Administrator will not send a Final Determination Notice to a

Preliminary Claimant, if his, her or its Plan Notice was returned as “undeliverable.” The Final

Determination Notice will further provide each Preliminary Claimant that is determined to be an

Eligible Claimant with his, her, or its Recognized Loss. The Final Determination Notice will

3

constitute the Fund Administrator’s final ruling regarding the eligibility status of the claim.

17.

“Net Available Fair Fund” means the Fair Fund, plus any interest or earnings,

less Administrative Costs.

18.

“Payee” means an Eligible Claimant whose distribution amount is equal to or

greater than $10.00, as calculated in accordance with the Plan of Allocation, who will receive a

Distribution Payment.

19.

“Person” means natural individuals as well as legal entities such as corporations,

partnerships, or limited liability companies.

20.

“Plan Notice” means a written notice from the Fund Administrator to each

Preliminary Claimant regarding the Commission’s approval of the Plan, including, as

appropriate: a statement characterizing the distribution; a link to the approved Plan posted on the

Commission’s website and instructions for requesting a copy of the Plan; the Certification Form,

along with specification of any information needed from the Preliminary Claimant to prevent

him, her, or it from being deemed an Unresponsive Preliminary Claimant; his, her, or its

preliminary Recognized Loss (if known); a description of the tax information reporting and other

related tax matters; the procedure for the distribution as set forth in the Plan; and the name and

contact information for the Fund Administrator as a resource for additional information or to

contact with questions regarding the distribution.

21.

“Plan of Allocation” means the methodology used by the Fund Administrator to

calculate if a Preliminary Claimant has suffered a Recognized Loss. The Plan of Allocation is

attached as Exhibit A.

22.

“Preliminary Claimant” means a Person, or their lawful successors, identified

by the Fund Administrator based on its review and analysis of applicable records obtained by the

Commission staff during its investigation, who may have suffered a loss as a result of their

purchases of the Security during the Relevant Period. A Preliminary Claimant also means an

investor who became aware of this Plan through the Summary Notice or other means, contacted

the Fund Administrator and followed the procedures for requesting a Plan Notice described in

paragraph 44.

23.

“Recognized Loss” means the amount of loss calculated in accordance with the

Plan of Allocation.

24.

“Relevant Period” means the period of time between October 1, 2017 and

January 3, 2018, inclusive.

25.

“Security” means SHIP tokens.

26.

“Summary Notice” means the notice published in print newspaper or internet

media that shall include, at a minimum, a statement of the purpose of the Fair Fund and the Plan,

the means of obtaining a Plan Notice and Certification Form. The Summary Notice will be

4

published in print newspapers or equivalent internet media outlines one (1) time and will appear

within ten (10) days of initial mailing of the Plan Notice.

27.

“Unresponsive Preliminary Claimant” means a Preliminary Claimant whose

address and/or email the Fund Administrator has not been able to verify and/or who does not

timely respond to the Fund Administrator’s attempts to obtain information, including any

information sought in the Plan Notice and Certification Form. Unresponsive Preliminary

Claimants will not be eligible for a distribution under the Plan.

IV.

TAX COMPLIANCE

28.

On December 20, 2022, the Commission appointed Miller Kaplan Arase LLP as

the tax administrator (the “Tax Administrator”) for the Fair Fund to handle the tax obligations of

the Fair Fund.2 The Tax Administrator will be compensated for reasonable fees and expenses

from the Fair Fund in accordance with its 2022-2024 Engagement Letter Agreement with the

Commission.3

29.

The Fair Fund constitutes a Qualified Settlement Fund (“QSF”) under Section

468B(g) of the Internal Revenue Code of 1986, as amended, 26 U.S.C. § 468B(g), and related

regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. The Tax Administrator is the

administrator of such QSF for purposes of Treas. Reg. § 1.468B-2(k)(3)(I) and shall satisfy the

tax-related administrative requirements imposed by Treas. Reg. § 1.468B-2, including, but not

limited to:

(a)

Obtaining a taxpayer identification number;

(b)

Requesting funds necessary for the timely payment of all applicable taxes,

the payment of taxes for which the Tax Administrator has received funds,

and the filing of applicable returns; and

(c)

Fulfilling any information reporting or withholding requirements imposed

on distributions from the Fair Fund.

30.

All tax obligations will be paid from the Fair Fund, subject to the review and

approval of Commission staff.

V.

FUND ADMINISTRATOR

31.

On February 24, 2023, the Commission appointed Analytics LLC, as the fund

administrator for the Fair Fund (the “Fund Administrator”), and the Fund Administrator has

obtained a bond in the amount of $2,050,000.00 as ordered.4 Pursuant to Rule 1105(a) of the

2

See Order Appointing Tax Administrator, Exchange Act Rel. No. 96547 (Dec. 20, 2022).

See Omnibus Order Directing the Engagement of Two Tax Administrators for Appointment on a Case-by-Case

Basis in Administrative Proceedings that Establish Distribution Funds, Exchange Act Rel. No. 94845 (May 4, 2022).

4

See Order Appointing Fund Administrator and Setting Administrator’s Bond Amount, Exchange Act Rel. No.

96982 (Feb. 24, 2023).

3

5

Commission’s Rules, 17 C.F.R. § 201.1105(a), the Fund Administrator may be removed at any

time by order of the Commission or hearing officer.

32.

The Fund Administrator will be responsible for administering the Fair Fund in

accordance with the Plan. This will include, among other things, taking reasonable steps to

obtain accurate email or mailing information for Preliminary Claimants; establishing a website

and staffing a call center to address inquiries regarding the Plan; producing and placing a

Summary Notice in print newspapers and/or internet media outlets, disseminating the Plan

Notice; preparing accountings; cooperating with the Tax Administrator appointed by the

Commission to satisfy any tax liabilities and to ensure compliance with income tax reporting

requirements, including but not limited to Foreign Account Tax Compliance Act (FATCA);

disbursing the Fair Fund in accordance with this Plan, as ordered by the Commission; and

researching and reconciling errors and reissuing payments, when possible.

33.

To carry out the purposes of this Plan, the Fund Administrator is authorized to

make and implement immaterial changes to the Plan upon agreement of the Commission staff. If

a change is deemed to be material by the Commission staff, Commission approval is required

prior to implementation by amending the Plan.

34.

The Fund Administrator may extend any procedural deadline contained in the

Plan for good cause shown, if agreed upon by the Commission staff.

35.

When administering this Plan, the Fund Administrator, and/or each of its

designees, agents and assigns, may rely on all applicable law; orders issued by the Commission,

including orders issued by delegated authority; orders issued by an administrative law judge, if

any, appointed in this proceeding; and any records, including records containing investor

information, provided by Commission staff.

36.

The Fund Administrator is authorized to enter into agreements with third parties

as may be appropriate or necessary in the administration of the Fair Fund, provided such third

parties are not excluded pursuant to other provisions of this Plan. In connection with such

agreements, the third parties shall be deemed to be agents of the Fund Administrator under this

Plan.

37.

The Fund Administrator will be entitled to payment from the Fair Fund of

reasonable fees and expenses, including the bond premium, incurred in the performance of its

duties (including any such fees and expenses incurred by agents, consultants or third parties

retained by the Fund Administrator in furtherance of its duties).

VI.

PLAN PROCEDURES

Specification of Preliminary Claimants

38.

Using information obtained during its investigation, the Commission has

identified the Preliminary Claimants. In addition, the Fund Administrator will publish a

Summary Notice acceptable to the Commission staff in print newspapers or equivalent internet

6

media outlet one (1) time and within ten (10) days of the initial mailing of the Plan Notice. To

respond to the Summary Notice, investors should follow the procedures to request a Plan Notice

as described in paragraph 44.

Procedures for Locating and Notifying Preliminary Claimants

39.

Within forty-five (45) days of Commission approval of the Plan, the Fund

Administrator will:

(a)

Establish and maintain a website, www.ShipchainFairFund.com, devoted

solely to the Fair Fund. The Fair Fund’s website will make available a

copy of the approved Plan, include a copy of the Plan Notice, the

Certification Form, and related materials in downloadable form, and such

other information that the Fund Administrator believes will be beneficial

to Preliminary Claimants;

(b)

Establish and maintain a toll-free telephone number, 1-844-972-8855, for

Preliminary Claimants to call and speak to a live representative of the

Fund Administrator during its regular business hours or, outside of such

hours, to hear pre-recorded information about the Fair Fund;

(c)

Establish and maintain a traditional mailing address, Shipchain Fair Fund,

P.O. Box 2002, Chanhassen, MN 55317, and an email address,

info@ShipchainFairFund.com, which will be listed on all correspondence

from the Fund Administrator to Preliminary Claimants as well as on the

Fair Fund’s website;

(d)

Establish and maintain a case specific database of all Preliminary

Claimants based upon information provided to and obtained by the Fund

Administrator, including their last known physical and email addresses;

(e)

Run a National Change of Address search to retrieve updated addresses

for all records in the database, thereby ensuring the mailing information

for Preliminary Claimants is up-to-date; and

(f)

Send a Plan Notice and Certification Form to each Preliminary Claimant’s

last known email address (if known) and/or mailing address.

40.

The Commission staff retains the right to review and approve any material posted

on the Fair Fund’s website, any communication with investors, and any scripts used in

connection with communications with investors.

Undeliverable Mail

41.

The Fund Administrator will attempt to locate any Preliminary Claimant whose

mailing is returned as undeliverable by the U.S. Postal Service or otherwise, including an

7

advanced address search using commercially available resources, if feasible, and will document

all such efforts. If another address is obtained, the Fund Administrator will then resend it to the

Preliminary Claimant’s new address within ten (10) days of receipt of the returned mail. If the

mailing is returned again, and the Fund Administrator, despite best practicable efforts, is unable

to find a Preliminary Claimant’s correct address, the Fund Administrator, in its discretion, may

deem such Preliminary Claimant an Unresponsive Preliminary Claimant.

42.

The Fund Administrator, with Commission staff approval, may engage a thirdparty search firm to conduct more rigorous searches for Persons whose mailings are returned as

undeliverable.

43.

Any Preliminary Claimant who relocates or otherwise changes contact

information after receipt of the Plan Notice must promptly communicate any change in address

or contact information to the Fund Administrator.

Procedures to Request Plan Notice

44.

Any Person who does not receive a Plan Notice and Certification Form, but who

is aware of this Plan (e.g., through other Preliminary Claimants or the Summary Notice) and

believes they should be included as a Preliminary Claimant should contact the Fund

Administrator within seventy-five (75) days from the approval of the Plan to establish that they

should be considered a Preliminary Claimant. The Fund Administrator will send the Person a

Plan Notice and Certification Form requiring documentation within fifteen (15) days of being

contacted by the Person.

Certification Requirement and Failure to Respond to Plan Notice

45.

In order to maintain classification as a Preliminary Claimant, a completed

Certification Form, together with all the required supporting documentation, must be signed by

the Preliminary Claimant under penalty of perjury under the laws of the United States and

returned to the Fund Administrator by the deadline stated in the Plan Notice, the Certification

Date. The Certification Form must be executed by the Preliminary Claimant, unless the Fund

Administrator, in its discretion, accepts such Certification Form from a successor, heir,

administrator, or other Person authorized to act on the Preliminary Claimant’s behalf. Those

authorized to act on behalf of the Preliminary Claimants will be eligible to participate in the

distribution to the same extent the original investor would have been eligible under the terms of

the Plan.

46.

The Fund Administrator will review all Certification Forms. Each Preliminary

Claimant will have the burden of proof to establish their identity as a Preliminary Claimant, or

his, her, or its successor. The Fund Administrator will have the right to request, and the

Preliminary Claimant will have the burden of providing to the Fund Administrator, any

additional information and/or documentation deemed relevant by the Fund Administrator.

47.

If a Preliminary Claimant fails to return the Certification Form and or any

requested supporting documentation within sixty (60) days from the mailing of the Plan Notice,

8

the Fund Administrator will make no fewer than two (2) attempts to contact the Preliminary

Claimant by mail, telephone or email, if known, to the Fund Administrator. If a Preliminary

Claimant fails to respond to the Fund Administrator’s contact attempts as described in this

paragraph, the Fund Administrator, in its discretion, may deem such Preliminary Claimant an

Unresponsive Preliminary Claimant.

Review of Certification Forms and Deficiency Process

48.

The Fund Administrator will provide a Determination Notice within forty-five

(45) days of the Certification Date to each Preliminary Claimant whose Certification Form is

deficient, in whole or in part. The Determination Notice will provide the reason(s) for the

deficiency (e.g., failure to provide required information or documentation). In the event the

claim is denied, in whole or in part, the Determination Notice will state the reason(s) for such

denial. The Determination Notice will also notify the Preliminary Claimant of the opportunity to

cure any deficiency, request reconsideration, or dispute the determination made by the Fund

Administrator and provide instructions regarding what is required to do so.

49.

Any Preliminary Claimant with a deficient claim will have thirty (30) days from

the date of the Determination Notice to cure any deficiencies identified in the Determination

Notice.

50.

Any Preliminary Claimant seeking reconsideration of a denied claim must advise

the Fund Administrator in writing within thirty (30) days of the date of the Determination Notice.

All requests for reconsideration must include the necessary documentation to substantiate the

basis upon which the Preliminary Claimant is requesting reconsideration of his, her, or its claim.

51.

The Fund Administrator will have the authority, in its sole discretion, to waive

technical deficiencies and approve claims on a case-by-case basis, or in groups of claims. All

determinations made by the Fund Administrator in accordance with the Plan in any dispute,

request for reconsideration, or request to cure a deficient claim will be final and not subject to

appeal

Dispute Process

52.

Disputes will be limited to the amount of the Preliminary Claimant’s calculated

Recognized Loss. Within sixty (60) days of the mailing of the Plan Notice and Certification

Form, the Fund Administrator must receive a written communication detailing any dispute along

with any supporting documentation. The Fund Administrator will investigate the dispute, and

such investigation will include a review of the written dispute as well as any supporting

documentation.

Final Determination Notices

53.

Within one hundred eighty (180) of the initial mailing of the Plan Notice, the

Fund Administrator will send a Final Determination Notice to (a) all Preliminary Claimants who

timely submitted a Certification Form, notifying the Preliminary Claimants of the Fund

9

Administrator’s eligibility determination, (b) any Preliminary Claimant who timely submitted a

written dispute as described in paragraph 52, notifying the Preliminary Claimant of its resolution

of the dispute; and (c) those Preliminary Claimants who have not responded to the Plan Notice,

as described in paragraphs 45-47 above, notifying the Preliminary Claimant that he, she, or it has

been deemed an Unresponsive Preliminary Claimant. The Fund Administrator will not send a

Final Determination Notice to a Preliminary Claimant if his, her or its Plan Notice was returned

as “undeliverable.” The Final Determination Notice will further provide each Preliminary

Claimant that is determined to be an Eligible Claimant with his, her, or its Recognized Loss. The

Final Determination Notice will constitute the Fund Administrator’s final ruling regarding the

eligibility status of the claim.

Distribution Methodology

54.

The Fund Administrator will calculate each Preliminary Claimant’s Recognized

Loss in accordance with the Plan of Allocation. All Preliminary Claimants who are determined

to have a Recognized Loss, and who are not deemed an Excluded Party or an Unresponsive

Preliminary Claimant will be deemed an Eligible Claimant. All Eligible Claimants whose

distribution amount is equal to or greater than $10.00, as calculated in accordance with the Plan

of Allocation, will be deemed a Payee and receive a Distribution Payment.

Establishment of a Reserve

55.

Before determining the amount of funds available for distribution and calculating

each Payee’s Distribution Payment, the Fund Administrator, in conjunction with the Tax

Administrator, will establish a reserve to pay Administrative Costs and to accommodate any

unexpected expenditures (the “Reserve”).

56.

After all Distribution Payments are made and Administrative Costs paid, any

remaining amounts in the Reserve will become part of the Residual described in paragraph 76

below.

Preparation of the Payment File

57.

Within two hundred fifty (250) days of Commission approval of the Plan, the

Fund Administrator will compile and send to the Commission staff the Payee information,

including the name, address, calculated Recognized Loss, and the amount of the Distribution

Payment for all Payees (the “Payee List”). The Fund Administrator will also provide a

Reasonable Assurances Letter to the Commission staff, representing that the Payee List: (a) was

compiled in accordance with the approved Plan; (b) is accurate as to Payees’ names, addresses,

Recognized Losses and amounts of their Distribution Payment; (c) includes the number of

Payees compensated; (d) the percentage of the Payee’s Recognized Loss being compensated by

the disbursement from the Fair Fund, and if applicable, the total percentage to include all prior

disbursements; (e) the total amount of funds to be disbursed; and (f) provides all information

necessary to make a payment to each Payee.

10

The Escrow Account

58.

Prior to the disbursement of funds from the Net Available Fair Fund, the Fund

Administrator will establish an escrow account (the “Escrow Account”) with a United States

commercial bank that is a well-capitalized financial institution as defined by the Federal Reserve

Act, Subpart D, 12 C.F.R. 208.43 and that is not unacceptable to the Commission staff (the

“Bank”), pursuant to an escrow agreement (the “Escrow Agreement”) to be provided by

Commission staff.

59.

The Fund Administrator, pursuant to the Escrow Agreement, shall also establish

with the Bank a separate deposit account (e.g., controlled distribution account, managed

distribution account, linked checking and investment account) (the “Distribution Account”),

insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the guaranteed FDIC pass

through limit. The Distribution Account shall be linked with the Escrow Account and shall be

named, and records maintained, in accordance with the Escrow Agreement.

60. During the term of the Escrow Agreement, the portions of the Fair Fund transferred

to the Escrow Account (the “Escrow Property”) shall be invested and reinvested in short-term

U.S. Treasury securities backed by the full faith and credit of the United States Government or

an agency thereof. The investment shall be, of a type and term necessary to meet the cash

liquidity requirements for payments to Payees and Administrative Costs, including investment or

reinvestment in a bank account insured by the FDIC up to the guaranteed FDIC limit, or in

money market mutual funds registered under the Investment Company Act of 1940 that invest

100% of their assets in direct obligations of the United States Government.

61. The Fund Administrator shall provide duplicate original bank and/or investment

statements on any accounts established by the Fund Administrator to the Tax Administrator on a

monthly basis and shall assist the Tax Administrator in obtaining mid-cycle statements, as

necessary.

62. The Fund Administrator, in consultation with the Commission staff, shall work

with the Bank on an ongoing basis to deposit or invest funds in the Escrow and Distribution

Accounts so as to result in the maximum reasonable net return, taking into account the safety of

such deposits or investments and tax implications; and to determine an allocation of funds

between the Escrow and Distribution Accounts.

63.

All interest, dividends, and/or income earned by the Escrow Property will accrue

for the benefit of the Escrow Property. All Administrative Costs associated with the Escrow and

Distribution Accounts will be the responsibility of the Fund Administrator, who may be

reimbursed for said costs as provided in this Plan. No such Administrative Costs may be paid to

the Bank, its agents, and/or its affiliates from the Escrow Property.

Distribution of the Fair Fund

64.

Upon the Commission’s staff’s receipt, review, and acceptance of the Payee List

and Reasonable Assurances Letter from the Fund Administrator, the Commission staff will seek

11

an order from the Commission pursuant to Rule 1101(b)(6) of the Commission’s Rules, 17

C.F.R. § 210.1101(b)(6), to disburse funds from the Net Available Fair Fund to the Bank in

accordance with the Payee List for distribution by the Fund Administrator in accordance with the

Plan. All disbursements will be made pursuant to a Commission Order.

65.

Upon issuance of an order to disburse, the Commission staff will direct the

transfer of funds in accordance with the Payee List to the Bank. The Fund Administrator will

then use its best efforts to commence mailing Distribution Payment checks and/or effect

electronic payments within ten (10) business days of the release of the funds into the Escrow

Account. All efforts will be coordinated to limit the time between the Escrow Account’s receipt

of the funds and the issuance of Distribution Payments.

66.

All checks will be issued by the Fund Administrator from the Distribution

Account. All checks will bear a stale date of one hundred twenty (120) days from the date of

issuance. Checks that are not negotiated by the stale date will be voided, and the Bank will be

instructed to stop payment on those checks. A Payee’s claim will be extinguished if he, she, or it

fails to negotiate his, her or its check by the stale date, and the funds will remain in the Fair

Fund, except as provided in paragraph 70.

67.

All Distribution Payments will be preceded or accompanied by a communication

that includes, as appropriate: (a) a statement characterizing the distribution; (b) a statement that

the tax treatment of the distribution is the responsibility of each Payee and that the Payee should

consult his, her or its tax advisor for advice regarding the tax treatment of the distribution; (c) a

statement that checks will be void and cannot be reissued after one hundred twenty (120) days

from the date the original check was issued; and (d) contact information for the Fund

Administrator for questions regarding the Distribution Payment. The letter or other mailings to

Payees characterizing a Distribution Payment will be submitted to the Tax Administrator and

Commission staff for review and approval.

68.

All Distribution Payments, either on their face or in the accompanying mailing,

will clearly indicate that the money is being distributed from the Fair Fund established by the

Commission to compensate investors for harm as a result of securities law violations.

Post Distribution; Handing of Returned or Uncashed Checks; and Reissues

69.

The Fund Administrator shall use its best efforts to make use of commercially

available resources and other reasonably appropriate means to locate all Payees whose checks

are returned to the Fund Administrator as “undeliverable.” If new address information becomes

available, the Fund Administrator will repackage the distribution check and send it to the new

address. If new address information is not available after a diligent search (and in no event no

later than one hundred twenty (120) days after the initial mailing of the original check) or if the

distribution check is returned again, the check shall be voided, and the Fund Administrator shall

instruct the issuing financial institution to stop payment on such check. If the Fund

Administrator is unable to find a Payee’s correct address, the Fund Administrator, in its

discretion, may remove such Payee from the distribution and the allocated Distribution Payment

will remain in the Fair Fund for distribution, if feasible, to the remaining Payees.

12

70.

The Fund Administrator will reissue checks or electronic payments to Payees

upon the receipt of a valid, written request from the Payee prior to the initial stale date. In cases

where a Payee is unable to endorse a Distribution Payment check as written (e.g., name changes,

IRA custodian changes, or recipient is deceased) and the Payee or a lawful representative

requests the reissuance of a Distribution Payment in a different name, the Fund Administrator

will request, and must receive, documentation to support the requested change. The Fund

Administrator will review the documentation to determine the authenticity and propriety of the

change request. If, in the discretion of the Fund Administrator, such change request is properly

documented, the Fund Administrator will issue an appropriately redrawn Distribution Payment to

the requesting party. Reissued checks will be void at the later of one hundred twenty (120) days

from issuance of the original check or thirty (30) days from the reissuance. In no event will a

check be reissued after the stale date of the original check without good cause found by the Fund

Administrator and the approval of Commission staff.

71.

The Fund Administrator will work with the Bank and maintain information about

uncashed checks and any returned items due to non-delivery, insufficient addresses, and/or other

deficiencies. The Fund Administrator is responsible for researching and reconciling errors and

reissuing payments when possible. The Fund Administrator is also responsible for accounting

for all payments. The amount of all uncashed and undelivered payments will continue to be held

in the Fair Fund.

72.

The Fund Administrator will make and document its best efforts to contact Payees

to follow-up on the status of uncashed distribution checks over $100 (other than those returned

as “undeliverable”) and take appropriate action to follow-up on the status of uncashed checks at

the request of Commission staff. The Fund Administrator may reissue such checks, subject to

the time limits detailed herein.

73.

At the discretion of the Fund Administrator, certain costs that were not factored

into the Reserve, such as bank fees for the return of a payment, may reduce the Payee’s

Distribution Payment. In such situations, the Fund Administrator will immediately notify the

Tax Administrator of the reduction in the Distribution Payment.

Receipt of Additional Funds

74.

Should any additional funds be received pursuant to Commission or Court order,

agreement, or otherwise, prior to the Commission’s termination of the Fair Fund, such funds will

be added to the Fair Fund and distributed, if feasible, in accordance with the Plan, pursuant to the

Commission’s Rules.

Disposition of Undistributed Funds

75.

If funds remain following the initial distribution and payment of all

Administrative Costs, the Fund Administrator, in consultation with the Commission staff, may

seek subsequent distribution(s) of any available remaining funds, pursuant to the Commission’s

Rules. All subsequent distributions shall be made in a manner that is consistent with this Plan.

13

76.

A residual within the Fair Fund will be established for any amounts remaining

after the final disbursement to Payees from the Fair Fund and the payment of all Administrative

Costs (the “Residual”). The Residual may include funds from, among other things, amounts

remaining in the Reserve, distribution checks that have not been cashed, checks or electronic

payments that were not delivered or were returned to the Commission, and tax refunds for

overpayment of taxes or for waiver of IRS penalties.

77.

All funds remaining in the Residual that are infeasible to distribute to investors

will be returned to the Commission and transferred to the U.S. Treasury after the final

accounting is approved by the Commission.

Administrative Costs

78.

All Administrative Costs will be paid from the Fair Fund in accordance with the

Commission’s Rules.

Filing of Reports and Accountings

79.

In accordance with Rule 1105(f) of the Commission’s Rules, the Fund

Administrator shall provide to the Commission staff a progress report and a quarterly account

statement in a format to be provided by Commission staff, within forty-five (45) days of the

Commission’s approval of the Plan and shall provide to Commission staff additional reports and

quarterly account statements within ten (10) days after the end of every calendar quarter. Such

progress reports shall inform the Commission staff of the activities and status of the Fair Fund

during the reporting period, and shall specify, at a minimum, the location of the account(s)

comprising the Fair Fund, including among other things, an interim accounting of all monies in

the Fair Fund.

80.

When the final distribution is completed, the Fund Administrator shall arrange for

the payment of all Administrative Costs, transfer all remaining funds to the Commission, and

submit a final accounting for approval by the Commission on a standardized form provided by

the Commission staff. The Fund Administrator will also submit a report to the Commission staff

containing the final distribution statistics regarding distributions to individuals and entities, and

such other information requested by the Commission staff.

Wind-down and Document Retention

81.

The Fund Administrator will shut down the website, P.O. Box and customer

service telephone line(s) established specifically for the administration of the Fair Fund six (6)

months after the transfer of any remaining funds to the Commission, or at such earlier time as the

Fund Administrator determines with the concurrence of the Commission staff.

82.

The Fund Administrator will retain all materials submitted by Preliminary

Claimants in either paper or electronic form for a period of six (6) years from the date of

approval of a final fund accounting. Materials maintained in electronic form must be accessible

14

and readable for the duration of retention. Pursuant to the Commission staff's direction, the Fund

Administrator will either turn over to the Commission or destroy all materials, including

documents in any media, upon expiration of this period.

Termination of the Fair Fund

83.

Once the Commission has approved the final accounting, the Commission staff

will seek an order from the Commission authorizing: (a) the transfer of any amounts remaining

in the Fair Fund that is infeasible to return to investors, and any amounts returned to the Fair

Fund in the future that is infeasible to return to investors, to the U.S. Treasury, subject to Section

21F(g)(3) of the Exchange Act; (b) discharge of the Fund Administrator; (c) cancellation of the

Fund Administrator’s bond; and (d) termination of the Fair Fund.

85.

The Fair Fund will be eligible for termination and the Fund Administrator will be

eligible for discharge after all of the following have occurred (a) a final accounting, in a standard

accounting format provided by the Commission staff, has been submitted by the Fund

Administrator and approved by the Commission; (b) all Administrative Costs have been paid;

and (c) any amount remaining in the Fair Fund has been returned to the Commission for transfer

to U.S. Treasury.

86.

Once the Fair Fund has been terminated and funds, if any are transferred to the

U.S. Treasury, no further claims will be allowed, and no additional payments will be made

whatsoever.

VII.

NOTICE OF PROPOSED PLAN AND OPPORTUNITY FOR COMMENT

87.

The Notice of the Proposed Plan of Distribution and Opportunity for Comment

(the “Notice”) shall be published on the Commission’s website

http://www.sec.gov/litigation/fairfundlist.htm. Any Person wishing to comment on the Plan

must do so in writing by submitting their comments within thirty (30) days of the date of the

Notice (a) to the Office of the Secretary, United States Securities and Exchange Commission,

100 F Street, N.E., Washington, D.C. 20549-1090; (b) by using the Commission’s Internet

comment form (www.sec.gov/litigation/admin.shtml); or (c) by sending an e-mail to rulecomments@sec.gov. Comments submitted by e-mail or via the Commission’s website should

include “Administrative Proceeding File No. 3-20185 in the subject line. Comments received

will be publicly available. Persons should only submit comments that they wish to make

publicly available.

15

Exhibit A

PLAN OF ALLOCATION

This Plan of Allocation is designed to compensate investors based on their losses on their

purchases of unregistered crypto assets known as “SHIP tokens” (“Security”) in the “pre-sale”

phase of the initial coin offering (“ICO”) from October 1, 2017 through January 3, 2018,

inclusive (the “Relevant Period”).1 Preliminary Claimants who did not purchase the Security

during the Relevant Period or who are an Excluded Party are ineligible to recover under this

Plan.

The Fund Administrator will calculate each Preliminary Claimant’s loss (“Recognized

Loss”) as follows:

A.

The dollar value of the Security purchased by the Preliminary Claimant in the

ICO pre-sale during the Relevant Period, minus

B.

The dollar value of sales proceeds from the sale of Security purchased in the ICO

pre-sale during the Relevant Period and sold before December 21, 2020 (the date

of the Order).2

Any Security purchased through secondary market transactions or received from the

issuer without payment, including airdrops, bonus tokens, bounty tokens, tokens awarded to

advisors, founders or employees, or tokens issued for services, is not eligible for consideration in

this Plan.

For purposes of the calculations in the Plan, prices and values will exclude all fees and

commissions, including gas fees and transaction fees to transfer value.

Any Preliminary Claimant who suffered a Recognized Loss pursuant to this Plan of

Allocation, and who is not an Excluded Party or an Unresponsive Preliminary Claimant, as

defined in the Plan, will be deemed an Eligible Claimant.

Additional Provisions

FIFO Methodology: Multiple purchases and sales of the Security will be matched

according to the first-in, first-out (“FIFO”) method. The earliest sales will be matched first

against purchases of the Security during the Relevant Period, until all the purchases during the

Relevant Period have been matched, and further sales will be ignored. For example, if a

Preliminary Claimant purchased 100 SHIP tokens during the Relevant Period, the first 100 SHIP

tokens sold through December 20, 2020 will be matched to the purchases and their sales

proceeds will be included the Recognized Loss calculation.

1

All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Plan.

For purposes of calculating Recognized Loss, purchase amounts and sales proceeds will be converted to U.S.

dollars using the appropriate exchange rate on the day the funds are paid or received, respectively. In calculating

Recognized Loss, any Security held on or after December 21, 2020 is assumed to have a value of $0.00.

2

Allocation of Funds: If the Net Available Fair Fund is equal to or exceeds the sum of

Recognized Losses of all Eligible Claimants, each Eligible Claimant’s distribution amount will

equal his, her or its Recognized Loss, plus any “Reasonable Interest” awarded. If the Net

Available Fair Fund is less than the sum of the Recognized Losses of all Eligible Claimants, each

Eligible Claimant’s distribution amount will equal his, her or its “Pro Rata Share” of the Net

Available Fair Fund. In either case, the distribution amount will be subject to the “Minimum

Distribution Amount.”

Pro Rata Share: A Pro Rata Share computation is intended to measure Eligible Claimants’

Recognized Losses against one another. The Fund Administrator shall determine each Eligible

Claimant’s Pro Rata Share as the ratio of his, her or its Recognized Loss to the sum of Recognized

Losses of all Eligible Claimants.

Reasonable Interest: If the Net Available Fair Fund exceeds that necessary to pay all

Eligible Claimants their Recognized Losses in full, the Fund Administrator, in consultation with

the Commission staff, may include interest in the distribution amount to compensate for the time

value of his, her, or its Recognized Loss. Reasonable Interest will be calculated using the Shortterm Applicable Federal Rate plus three percent (3%), compounded quarterly from the end of the

Relevant Period through the approximate date of the disbursement of the funds. If there are

insufficient funds to pay Reasonable Interest in full to all Eligible Claimants, each Eligible

Claimant’s Reasonable Interest amount will be equal to his, her, or its Pro-Rata Share of excess

funds.

Minimum Distribution Amount: The Minimum Distribution Amount will be $10.00 (inclusive

of Reasonable Interest, if any). If an Eligible Claimant’s distribution amount is less than the Minimum

Distribution Amount, that Eligible Claimant will be deemed ineligible to receive a Distribution

Payment and his, her or its distribution amount may be reallocated on a pro-rata basis to Eligible

Claimants whose distribution amounts are greater than or equal to the Minimum Distribution Amount.

Payee: An Eligible Claimant whose distribution amount equals or exceeds the Minimum

Distribution Amount will be deemed a Payee.

Distribution Payment: Each Payee will receive a Distribution Payment equal to his, her or

its distribution amount. In no event will a Payee receive from the Fair Fund more than his, her,

or it Recognized Loss, plus Reasonable Interest, if applicable.

2