Crypto Exchange Beaxy Target of SEC Enforcement Action for Operating Unregistered Exchange, Broker, Clearing Firm

The Securities and Exchange Commission has charged the crypto exchange beaxy ( and its executives with operating an unregistered national securities exchange, broker, and clearing agency. The SEC states that it has also charged the founder of the platform, Artak Hamazaspyan, and Beaxy Digital, Ltd., with raising $8 million in an unregistered offering of the Beaxy token (BXY) while alleging that Hamazaspyan misappropriated at least $900,000 for personal use, including gambling. At the same time, the SEC has charged affiliated market makers operating on the Beaxy Platform as unregistered dealers.

Yesterday, beaxy posted a statement that it had suspended its services due to the uncertain regulatory environment.

Without admitting or denying the allegations in the complaint, all defendants have agreed to permanent injunctions prohibiting them from future violations of the securities laws alleged in the complaint and to pay civil penalties.

According to the SEC’s complaint, since October 2019, Nicholas Murphy and Randolph Bay Abbott, through the company they managed, Windy Inc., maintained and provided the Beaxy Platform that facilitated buying and selling of crypto assets that were offered and sold as securities.

The SEC’s complaint also alleges that, after Murphy and Abbott convinced Hamazaspyan to resign following the unregistered offering of BXY and the misappropriation of investor assets, the two continued the operation of the Beaxy Platform through Windy, and as such, are also liable for operating an unregistered exchange, broker, and clearing agency.

The complaint also alleges that, in December 2019, Windy entered into an agreement with Brian Peterson and his companies, including Braverock Investments LLC, Future Digital Markets Inc., Windy Financial LLC, Future Financial LLC, to provide market-making services for BXY, and in May 2020, one of these companies entered into a similar market making agreement for another crypto asset security. By doing so, the complaint alleges that Peterson and the Braverock Entities acted as unregistered dealers.

SEC Chair Gary Gensler commented on the enforcement action:

“We allege that Beaxy and its affiliates performed the functions of an exchange, broker, clearing agency, and dealer without registering with the Commission and complying with clear, time-tested rules governing those activities. Our securities laws for decades have served to protect investors, make capital formation easier and cheaper, and improve our markets. This case serves as yet another reminder to crypto intermediaries that their business models must comply and adapt to the law, not the other way around.”

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement said that when a crypto intermediary combines all of these functions under one roof—as they allege the blurring of functions and the lack of registrations meant that regulations designed to protect investors were not followed or even recognized.

Windy, Murphy, Abbott, and Peterson have agreed to perform certain undertakings, including ceasing all activities as an unregistered exchange, clearing agency, broker, and dealer; shutting down the Beaxy Platform; providing an accounting of assets and funds for the benefit of customers; transferring all customer assets and funds to each respective customer; and destroying any and all BXY in Windy’s possession.

Windy, Abbott, and Murphy agreed to pay a total of $79,200 in civil penalties; Peterson agreed to pay a civil penalty of $6,600; and the Braverock Entities agreed to jointly and severally pay a penalty of $80,000. In addition, Windy agreed to pay $10,779 in disgorgement plus prejudgment interest, and the Braverock Entities agreed to jointly and severally pay $52,000 in disgorgement plus prejudgment interest. The penalty amounts reflect the cooperation the staff received from the settling parties during the investigation.

The SEC added that it is litigating its charges against Hamazaspyan for securities fraud and against Hamazaspyan and Beaxy Digital for the unregistered offering of BXY.

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