The U.S. Securities and Exchange Commission (SEC) posted a press release “SEC Charges Crypto Asset Trading Platform Bittrex and its Former CEO for Operating an Unregistered Exchange, Broker, and Clearing Agency” From the press release:
“The Securities and Exchange Commission today charged crypto asset trading platform Bittrex, Inc., and its co-founder and former CEO William Shihara for operating an unregistered national securities exchange, broker, and clearing agency. The SEC also charged Bittrex, Inc.’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.
Since at least 2014, Bittrex has held itself out as a platform that facilitated buying and selling of crypto assets that the SEC’s complaint alleges were offered and sold as securities. From 2017 through 2022, Bittrex earned at least $1.3 billion in revenues from, among other things, transaction fees from investors, including U.S. investors, while servicing them as a broker, exchange, and clearing agency without registering any of these activities with the Commission.
The complaint further alleges that Bittrex and Shihara, who was the company’s CEO from 2014 to 2019, 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.
For example, in an effort to avoid to avoid regulatory scrutiny, before Bittrex would make an asset available on its platform, Bittrex and Shihara instructed issuer-applicants to delete statements related to “price prediction[s]” “expectation of profit”, and other “investment terms.”…
…The SEC’s complaint, filed in the U.S. District Court for the Western District of Washington, alleges that Bittrex and Bittrex Global should have registered as an exchange because they brought together, using a shared order book, the orders for securities of multiple buyers and sellers using established, non-discretionary methods under which such orders interacted, and the buyers and sellers entering such orders agreed to the terms of a trade.
The complaint further alleges that Bittrex should have registered as a clearing agency because it acted as an intermediary in making payment and deliveries upon matching sell and buy orders and maintained custody of customer assets. Finally, the complaint alleges that Bittrex should have registered as a broker because it regularly engaged in the business of effecting transactions for the accounts of others in crypto assets that were offered and sold as securities…”
The Wall Street Journal reported the Bittrex Inc. once ranked as the country’s biggest platform for trading digital assets. Its rocky history at home is coming to an end with a regulatory threat and a decision to leave the U.S. for good.
The Securities and Exchange Commission’s enforcement staff told Bittrex in March it would recommend that the agency sue the company over alleged violations of investor-protection laws, according to David Maria, the company’s general counsel.
According to The Wall Street Journal, Seattle-based Bittrex was already prepared to wind down its U.S. operations when it got the notice, Mr. Maria said, citing the difficulty of working with U.S. regulators that have taken enforcement action against over 100 crypto defendants in six years. The SEC declined to comment.
It seems to me that companies that buy and sell cryptocurrency should take some time to learn what the rules are in the United States about what they are allowed to do, and what they should not do. Those that don’t bother to register as an exchange seem to be facing trouble from the SEC.