Bittrex Sued By SEC For Operating Illegal Exchange Even As It Shutters US Ops

Securities and Exchange Commission (SEC) Chair Gary Gensler testifies before the Senate Banking, Housing, and Urban Affairs Committee, on Capitol Hill, September 15, 2022 in Washington, DC.

Kevin Dietsch / Getty Images

In its latest cryptocurrency crackdown, the U.S. Securities and Exchange Commission (SEC) sued Bittrex for breaking securities laws, despite the exchange actively winding down its U.S. operations.

Key Takeaways

  • The SEC alleges that Bittrex and its former CEO Bill Shihara operated a securities exchange, broker, and clearing agency without proper registration.
  • The SEC alleges that Bittrex and Shihara knowingly asked issuers of coins to delete statements from their offerings that could suggest those coins were securities.
  • Bittrex earlier announced winding down its U.S. operations on account of regulatory uncertainty.

The SEC's Complaint Against Bittrex

According to the SEC's complaint, Bittrex and its former CEO Bill Shihara knowingly circumvented the registration requirements of the federal securities laws by instructing issuers of crypto assets to delete certain statements from their offering materials that would indicate that they were securities. Bittrex also earned at least $1.3 billion in revenues from transaction fees from investors, including U.S. investors, without registering or complying with U.S. securities laws.

Last month, Bittrex announced a planned shutdown of its operations in the United States by the end of April, citing concerns related to regulatory uncertainty.

This lawsuit is part of the SEC's ongoing efforts to protect investors and ensure compliance in the crypto markets. SEC Chair Gary Gensler said "the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity" and "cosmetic alterations did nothing to change the underlying economic realities of the offerings and Bittrex's conduct."

"Bittrex repeatedly chose profits over investor protection," said SEC's Director of Enforcement Gurbir S. Grewal.

Bittrex is not the only exchange with legal challenges from the SEC. U.S.-based crypto exchange Coinbase has revealed they received a "Wells notice," which indicates they could soon be facing enforcement action from the SEC as well.

The SEC has been criticized for its recent enforcement actions against crypto firms and the crypto community says it needs more clarity on rules. Gensler has repeatedly said many crypto trading platforms fit the current definition of an exchange and should comply with securities laws.

The regulator is also seeking comments to amend the definition of exchanges to bring crypto exchanges more solidly under its purview.

Gensler Faces Pushback from Congress

Over the weekend, this criticism came to a head as U.S. Congressman Warren Davidson (R-OH) shared his intention to introduce legislation for the purpose of having the SEC chair removed from his position.

Gensler has also faced disagreements from within his own department, particularly from SEC Commissioner Hester Pierce, who has opposed the redefinition of an exchange to more directly include various aspects of the crypto market, specifically in the areas of decentralized finance (DeFi).

Article Sources
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  1. U.S Securities and Exchange Commission. "SEC Charges Crypto Asset Trading Platform Bittrex and its Former CEO for Operating an Unregistered Exchange, Broker, and Clearing Agency."

  2. U.S. Securities and Exchange Commission. "Bittrex Complaint."

  3. Coinbase. "We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead."

  4. U.S. Securities and Exchange Commission. "SEC Reopens Comment Period for Proposed Amendments to Exchange Act Rule 3b-16 and Provides Supplemental Information."

  5. Twitter. "Warren Davidson's Twitter."

  6. U.S. Securities and Exchange Commission. "Rendering Innovation Kaput: Statement on Amending the Definition of Exchange."

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