Bittrex, Inc. and its co-founder and former CEO William Shihara have been charged by the U.S. Securities and Exchange Commission with running an unlicensed national securities exchange, broker, and clearing agency, according to a news release.
In addition, Bittrex Global GmbH, a foreign affiliate of Bittrex, Inc., was accused by the SEC of operating a single-shared order book alongside Bittrex while failing to register as a national securities exchange.
"Today’s action, yet again, makes plain that the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity," SEC Chair Gary Gensler said in a stastement. "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. Further, Bittrex, as alleged, failed to register and comply with U.S. securities laws as an exchange, broker-dealer, and clearing agency. Cosmetic alterations did nothing to change the underlying economic realities of the offerings and Bittrex’s conduct. Today we’re holding Bittrex accountable for its non-compliance."
Bittrex has promoted itself as a marketplace for buying and selling cryptocurrency assets since at least 2014, when the SEC's complaint claims that these assets were being marketed and sold as securities. Between 2017 and 2022, Bittrex generated at least $1.3 billion in revenue, primarily from transaction fees paid by investors, including Americans, while acting as their broker, exchange, and clearing agency without filing any paperwork with the Commission in connection with any of these activities.
The complaint also claims that Bittrex and Shihara, who served as the organization's CEO from 2014 to 2019, worked with issuers who wanted to list their cryptocurrency for trading on Bittrex's platform to first remove any "problematic statements" Shihara thought might prompt a regulator, like the SEC, to look into the cryptocurrency asset as an offering of a security. For instance, Bittrex and Shihara directed issuer-applicants to remove comments relating to "price prediction[s]," "expectation of profit," and other "investment related phrases" before making an asset available on their platform in an effort to escape regulatory scrutiny.
