The agency said Bittrex failed to register as an exchange, broker or clearing agency.
The U.S. Securities and Exchange Commission alleged that crypto exchange Bittrex simultaneously operated a national securities exchange, broker and clearing agency in violation of federal statutes. Former CEO Bill Shihara and Bittrex Global GmbH are also facing charges.
Bittrex worked with crypto issuers to “delete … ‘problematic statements'” that the SEC would investigate, the regulator said in a press release Monday, including price predictions and statements implying an “expectation of profit.” The SEC also claims Bittrex should have registered as an exchange, clearing agency and broker, as it provided the services of all three types of entities.
SEC Enforcement Director Gurbir Grewal said the lawsuit against Bittrex “should send a message to other non-compliant crypto market intermediaries.
“As laid out in our complaint, Bittrex’s business model was based on three things: circumventing the registration requirements of the federal securities laws; counseling issuers of crypto asset securities to do the same by altering their offering materials; and combining multiple market intermediary functions under one roof to maximize profits,” he said.
Bittrex announced last month it planned to exit the U.S. by the end of April, citing “the current U.S. regulatory and economic environment.” This past weekend, the company shared more information, when general counsel David Maria told the Wall Street Journal that the company had received a Wells Notice – a statement that the SEC’s Enforcement Division found evidence of legal violations – in March. Maria told the Journal that Bittrex would fight the suit unless the SEC provided a “reasonable settlement offer.”
The SEC’s suit is reminiscent of a recent action against Beaxy, a company that settled similar charges, and is suggestive of the charges it may bring against Coinbase (COIN), the largest exchange in the U.S., which received a Wells Notice last month.
According to the complaint against Bittrex, the SEC alleges omise go (OMG), algorand (ALGO), dash (DASH), tokencard (TKN), i-house token (IHT) and naga (NGC) are securities. Algorand’s token fell on the news, dropping 2.5% in intraday trading with volume spiking.
UDPATE (April 17, 2023, 14:20 UTC): Adds additional detail.
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