Crypto Exchange Bittrex Violated Federal Laws, SEC Charges in Lawsuit

Explore the policy fallout from the 2022 market crash, the advance of CBDCs and more.

The U.S. Securities and Exchange Commission (SEC) 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 published 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 which settled similar charges, and is suggestive of the charges it may bring against Coinbase (COIN), the U.S.’s largest exchange which also received a Wells Notice last month.

According to the complaint, 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 24-hour volume spiking.

UDPATE (April 17, 2023, 14:20 UTC): Adds additional detail.

UPDATE (April 17, 14:30 UTC): Adds quote from SEC Enforcement Director Gurbir Grewal.

UPDATE (April 17, 14:40 UTC): Adds algo price movement.

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