This may be a bastardization rumor referencing "Chinese Chalk" (or "Miraculous Chalk"), special insecticide-laced chalk which can be used to block the paths of insects. I have heard of overseas restaurants using this chalk to draw lines on the legs of tables, preventing bugs from climbing up the table legs. It is a banned substance in the United States due to
- potentially unknown insecticide used in the chalk
- people using it barehanded when it is potentially unsafe to do so
- children mistaking it for actual chalk
The phrase "made up of ground-up and compressed shells of marine animals" definitely describes the chalky, white powder commonly referred to as "diatomaceous earth". Diatomaceous earth sticks to the carapace of insects and is as sharp as broken glass at their microscopic level; it is frequently used to get rid of bed bugs.
Chinese Chalk may be made of a combination of diatomaceous earth and deltamethrin, a combination which is marketed in powder form as the insecticide Delta Dust. I've used it effectively (with a duster) to stop existing / prevent further white-footed ants, but diatomaceous earth itself might be sufficient alone. While I have never tried to compress them into stick form, both Delta Dust and diatomaceous earth are chalky, white powders, and may be applied with a paint brush, the results of which could appear to emulate a chalk line.