SEC Charges Bittrex for Operating Unregistered Crypto Exchange
On April 17th, 2023, the US SEC announced charges against Bittrex, Inc. and its co founder and former CEO William Shiharra for functioning an unauthorised national securities exchange. The SEC charged Bittrex Global GmbH, an overseas subsidiary of Bittrex, Inc. They failed to get a license as a national security exchange.
We also charged Bittrex’s foreign affiliate, 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.
— U.S. Securities and Exchange Commission (@SECGov) April 17, 2023
SEC Alleges Bittrex Coordinated with Issuers to Avoid Regulatory Attention
According to the SEC, Bittrex promoted itself as a marketplace for selling and buying digital assets since at least 2014. It generated at least 1.3 billion USD in income from 2017 to 2022. It served investors as a clearing agency, broker, and exchange without registration with the Commission for any of these operations. These investors included U.S. investors.
The SEC charges that Shihara and Bittrex, who had been the CEO from 2014 -2019, matched with issuers who wanted to list their cryptocurrency asset for dealing on Bittrex’s forum to first remove certain problematic declarations that Shihara assumed would lead a watchdog, like the US SEC, to examine the cryptocurrency holding as the contribution of a safety. To escape regulatory attention, Siharra and Bittrex required issuer-applicant to remove any references to price forecast, the anticipation of profits, and other investments before the asset could be listed on the exchange’s platform.
SEC Warns Crypto Market Intermediaries to Comply with Federal Securities Laws
The complaint further alleges that Bittrex’s business model relied on three unlawful practices. It avoids federal securities law registration requirements, advising issuers of cryptocurrency assets security to avoid registration by modifying offering materials. It merges the roles of multiple market intermediaries under single roof.
The action that was taken today should not only hold Bittrex responsible for activities that put shareholders at risk, but it should also serve as a signal to any cryptocurrency market mediators who fail to comply with federal securities rules.
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Both Bittrex and Shihara are being investigated for several offences. The most serious of these is a violation of the registration requirements of the Securities Exchange Act of 1934.
This development highlights the importance of complying with federal securities laws, particularly in the rapidly evolving and often misunderstood world of cryptocurrency. It is a reminder that no one is above the law and that investors deserve protection regardless of the asset class they invest in Bittrex has not yet released a statement on the charges.
