SEC files charges against Bittrex and its CEO for offering unregistered services
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The US Securities and Exchange Commission (SEC) has filed charges against the Bittrex cryptocurrency exchange and its former CEO, William Shihara. The SEC said the exchange failed to secure registration to operate as a national securities exchange, brokerage platform, and clearing agency.
SEC files charges against Bittrex
The SEC said that Bittrex violated the requirements for registration under the US federal securities law. The regulator has also imposed charges against Bittrex Global GmbH for partnering with Bittrex to offer services without registering as a securities exchange. These charges come a few weeks after Bittrex announced it was shutting down US operations because of an unclear regulatory framework.
In its complaint, the SEC said that Bittrex has allowed traders to buy and sell cryptocurrencies offered as securities on the platform since 2014. The exchange generated around $1.3 billion in revenues between 2017 and 2022 by offering crypto services as an exchange, broker, and clearing agency.
The exchange also generated revenues from the transaction fees charged to investors trading on the platform. However, the SEC noted that none of the services offered by Bittrex were registered with the SEC.
According to the SEC, Bittrex and Bittrex Global needed to register as brokerage companies because they used a central system to settle buy and sell orders. The SEC added that Bittrex needed to file for registration as a clearing agency that enabled payments and deliveries after matching the buy and sell orders.
“As alleged in our complaint, Bittrex and issuers that it worked with knew the rules that applied to them but went to great lengths to evade them by directing issuer-applicants to ‘scrub’ offering materials of information indicating that certain crypto assets were securities,” said the SEC Chair, Gary Gensler.
Bittrex to challenge SEC Action in court
The co-founder and CEO of Bittrex, Richie Lai, commented on this development saying that the exchange had made an effort to work with the SEC for many years on the assets classified as securities. According to Lai, Bittrex would challenge the SEC action in court.
Bittrex later said that its platform did not offer or trade securities on the platform. The firm has also said that the SEC failed to inform the exchange about the specific conduct that amounted to violating the federal securities laws despite these requests being made for more than five years.
Lai said that Bittrex had previously urged the SEC to inform it of the digital assets classified as securities so that they could be delisted from the platform. However, the SEC failed to provide any clarity.
The recent action comes as the SEC tightens its grip on the cryptocurrency market. The regulator is also taking action against other exchanges such as Coinbase, Gemini, Genesis, and Kraken. Regulatory attention in the crypto industry has been building up since the collapse of FTX and several firms last year, triggering notable losses for investors. However, the SEC has been previously criticized for ruling through enforcement.
