Another legal battle has begun in the crypto sector, with a US agency claiming Bittrex has been operating as an “unregistered national securities exchange, broker and clearing agency.”
The US Securities and Exchange Commission (S.E.C.) claims Bittrex has facilitated the buying and selling of crypto assets that were offered and sold as financial securities.
The SEC has also charged Bittrex’s foreign entity, Bittrex Global, for failing to register as a national securities exchange “in connection with its operation of a single shared order book along with Bittrex.”
Other Allegations from the SEC
In a statement, the SEC also alleges Bittrex and its former CEO William Shihara told issuers to delete “problematic statements” before putting crypto assets on the platform. These statements included price predictions, expectations of profit, and other “investment-related terms.”
The SEC claims this was done by Bittrex to “avoid regulatory scrutiny.”
“Today’s action, yet again, makes plain that the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity,” said SEC chair Gary Gensler.
“As alleged in our complaint, Bittrex and issuers that it worked with knew the rules that applied to them but went to great lengths to evade them by directing issuer-applicants to ‘scrub‘ offering materials of information indicating that certain crypto assets were securities.”
Did Bittrex Have a Response?
In a statement, Bittrex said it was “disappointed” by the SEC’s decision and claims it is part of a “larger crusade” to drive cryptocurrency out of the US.
The company claims it provides a platform for “digital assets” and does not offer or trade securities on the platform. The claims it asked the SEC to provide notice of “specific conduct that it thought violated the federal securities laws” for five years.
“Bittrex operated within the parameters of the law at all times, and we look forward to vindicating our position in court,” Bittrex said.
Bittrex CEO Sounds Off
CEO Oliver Linch said its exchange has no US customers and has “never held itself out as doing business in the US or with US persons.” Linch also said the company plans to “vigorously defend” itself from the SEC allegations.
“Bittrex Global is always willing to work productively with regulators,” Linch said. “But we are disappointed to say that the SEC does not seem interested in having constructive conversations.”
The charges against Bittrex mark the latest development in the seemingly chaotic crypto sector, which has faced a number of setbacks and legal challenges in recent months.
Last month, US regulators sued the world’s largest crypto exchange, Binance, for numerous alleged violations of US trading rules. Binance responded to the complaint calling it “an incomplete recitation of facts” after an initial review of the filing.
Earlier last month, the crypto-focused Silvergate Capital announced plans to wind down its operations and liquidate its bank ( you remember that debacle, right?) due to its recent wave of financial issues and the turmoil of the crypto industry.
The organization entered a downward spiral after the crypto exchange FTX collapsed last year. The bank was forced to sell billions worth of assets throughout the start of 2023 as customer accounts were withdrawn.
Will the SEC Ever Ease Up on Crypto?
The SEC’s latest clampdown on Bittrex suggests that most crypto exchanges operating in the U.S. are probably, in the SEC’s view, breaking the law (yikes)!
Last month, the SEC sent a Wells Notice to Coinbase, telling the exchange it would bring charges against it for operating an illegal securities exchange.
Before that, the SEC forced Kraken, another exchange, to shutter its U.S. operations for security violations. More recently, the commission sued crypto entrepreneur Justin Sun for alleged securities law violations. Will the crypto witch hunt ever end?