The Securities and Exchange Commission (SEC) announced on August 10, 2023 that Bittrex Inc., a well-known cryptocurrency trading platform, and its co-founder and former CEO, William Shihara, had settled claims that they had operated without the necessary licences. Operating a national securities exchange, broker, and clearing agency without registration was included in the allegations. Similarly charged with failing to register as a national securities exchange was Bittrex Global GmbH, Bittrex’s international rival. The SEC’s complaints are detailed in court documents from the U.S. District Court for the Western District of Washington, underscoring Bittrex’s status as an unregistered company that caters to American investors.
The SEC claims that these investors were given access to crypto assets that were actually securities. The story is complicated by allegations that Bittrex, acting on Shihara’s direction, directed cryptocurrency issuers to retract certain public remarks that would raise regulatory flags.
“Bittrex’s long-standing tactic of sanitising online statements to avoid federal securities regulations has proven futile,” said Gurbir S. Grewal, director of the SEC’s Enforcement Division.
Bittrex and Shihara are forbidden by the terms of the settlement from violating particular provisions of the Securities Exchange Act of 1934. Financially, both Bittrex firms are jointly liable for $24 million, which includes different fines and obligations.
This agreement is in reaction to the SEC’s accusation, which was made public on April 17, 2023, that Bittrex had accrued an astounding $1.3 billion in transaction fees while failing to comply with legal criteria for registration. Gary Gensler, the chair of the Securities and Exchange Commission, stepped in and stated, “The recurring issues in the crypto sector aren’t rooted in ambiguous regulations, but in a pervasive nonchalance towards compliance.”
The parties involved in the deal have not confirmed nor denied the SEC’s allegations while the arrangement is awaiting judicial approval. This incident serves as yet another example of the strict regulation that the crypto industry is currently under.
Legal issues for Bittrex extend beyond the SEC. The U.S. Department of the Treasury’s FinCEN and OFAC announced sizeable settlements with the cryptocurrency exchange on October 11 of last year, totaling more than $24 million and $29 million, respectively.
It is clear that the SEC takes a strict stance against crypto exchanges. Giant cryptocurrency exchanges like Gemini, Binance, and Coinbase have all been charged this year alone. While some choose settlements, like Bittrex and Kraken, others, most notably Coinbase, continue to be involved in legal disputes.