The SEC has charged Bittrex, Inc., its co-founder and former CEO William Shihara, and its foreign affiliate Bittrex Global GmbH for operating as unregistered national securities exchange, broker, and clearing agency. According to the SEC, Bittrex has facilitated buying and selling of crypto assets, which the SEC alleges were offered and sold as securities since 2014. From 2017 to 2022, Bittrex earned at least $1.3 billion in revenues from transaction fees, including those from U.S. investors, without registering any of these activities with the SEC.
The complaint alleges that Bittrex and Shihara coordinated with issuers who sought to have their crypto assets available for trading on Bittrex’s platform, instructing them to delete certain "problematic statements" that could lead regulators, like the SEC, to investigate the crypto asset as an offering of a security. They asked issuer-applicants to remove statements related to "price prediction[s]," "expectation of profit," and other "investment-related terms" to avoid regulatory scrutiny.
SEC Chair Gary Gensler emphasized that this action reveals the lack of regulatory compliance in the crypto markets, with Bittrex and the issuers it worked with knowingly evading applicable rules. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, added that Bittrex prioritized profits over investor protection and their business model was based on circumventing federal securities laws, counseling issuers to do the same, and maximizing profits by combining multiple market intermediary functions under one roof.
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, as they used a shared order book to bring together orders for securities of multiple buyers and sellers. It also alleges that Bittrex should have registered as a clearing agency, as it acted as an intermediary in making payments and deliveries upon matching sell and buy orders, and maintained custody of customer assets. Lastly, the complaint claims that Bittrex should have registered as a broker, as it regularly engaged in the business of effecting transactions for the accounts of others in crypto assets that were offered and sold as securities.
Bittrex denies any wrongdoing, their response is here.
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