Bittrex, a crypto exchange that announced it was ceasing operations at the end of last month, has been hit with an enforcement action by the Securities and Exchange Commission (SEC). The SEC has charged Bittrex and its former CEO William Shihara for operating an unregistered national securities exchange, broker-dealer, and clearing agency.
The SEC has recently stepped up its pace of enforcement actions against crypto platforms as well as issuers of digital assets that are deemed to be securities.
SEC Chair Gary Gensler said the enforcement action makes plain that the crypto markets have a “lack of regulatory compliance, not a lack of regulatory clarity.”
“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. Further, Bittrex, as alleged, failed to register and comply with U.S. securities laws as an exchange, broker-dealer, and clearing agency. Cosmetic alterations did nothing to change the underlying economic realities of the offerings and Bittrex’s conduct. Today we’re holding Bittrex accountable for its non-compliance.”
The SEC also charged Bittrex Global GmbH for failing to register as a national securities exchange in connection with its operation of a single shared order book along with Bittrex.
The SEC alleges that Bittrex sold crypto securities. From 2017 through 2022, Bittrex is said to have earned at least $1.3 billion in revenues from transaction fees from investors, including U.S. investors.
The SEC also alleges that Shihara “coordinated with issuers who sought to have their crypto asset made available for trading on Bittrex’s platform to first delete from public channels certain “problematic statements” that Shihara believed would lead a regulator, such as the SEC, to investigate the crypto asset as the offering of a security.”
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said that the allegations indicate that Bittrex circumvented the registration requirements of the federal securities laws; counseled issuers of crypto asset securities to do the same by altering their offering materials; and combined multiple market intermediary functions under one roof to maximize profits.
The SEC’s complaint was filed in the US District Court for the Western District of Washington, alleging that Bittrex and Bittrex Global should have registered as an exchange.
Over the weekend, it was reported that Bittrex had received a Wells Notice indicating a good likelihood of an enforcement action.
At the end of March, Bittrex posted a statement indicating that it was shutting down, providing a timeline for account holders to exit their positions and withdraw funds. Bittrex had indicated that it would focus on its international operations. Bittrex had criticized the lack of clarity in digital asset regulation as the reason it was closing its US business.