Bittrex, a platform for trading crypto assets, along with its former CEO, has chosen to settle the charges levied by the U.S. Securities and Exchange Commission for operating an unregistered exchange, broker and clearing agency. Bittrex Global GmbH also resolved the charges it faced for not registering as a national securities exchange, according to an Aug. 10 news release.
"For years, Bittrex worked with token issuers to 'scrub' their online statements of any indicia that they were investment contracts — all in an effort to evade the federal securities laws, they failed," Director of the SEC’s Division of Enforcement Gurbir S. Grewal said in the release. “Today’s settlement makes clear that you cannot escape liability by simply changing labels or altering descriptions because what matters is the economic realities of those offerings."
Bittrex and its co-founder and former CEO, William Shihara, agreed to settle charges concerning the operation of an unregistered national securities exchange, broker and clearing agency, the release reported. Additionally, Bittrex's foreign affiliate, Bittrex Global GmbH, has also consented to settle charges related to its failure to register as a national securities exchange.
The SEC's complaint, filed in April 2023, alleged Bittrex provided services to U.S. investors involving crypto assets that were deemed securities. The complaint claimed Bittrex and Shihara, who was the CEO between 2014 and 2019, instructed issuers to remove specific statements Shihara considered "problematic" from public platforms, with the intention to deter regulatory scrutiny by organizations like the SEC, the release said.
In the settlement agreement, neither Bittrex nor Shihara admit to or deny the allegations made by the SEC. The proposed settlement, contingent upon court approval, mandates permanent injunctions against Bittrex and Shihara to prevent violations of Sections 5, 15(a) and 17A of the Securities Exchange Act of 1934, the release reported.
Similarly, Bittrex Global is prohibited from violating Section 5 of the same Act. As part of the settlement, Bittrex and Bittrex Global will jointly and severally disburse disgorgement of $14.4 million, $4 million as prejudgment interest and a $5.6 million civil penalty, resulting in a total financial payment of $24 million, according to the release.
The SEC's comprehensive investigation was carried out by Daphna Waxman and Pamela Sawhney of the Division of Enforcement's Crypto Assets and Cyber Unit, along with Ainsley Kerr of the Market Abuse Unit and Jordan Baker, Neil Hendelman and Lisa Knoop from the New York Regional Office. The oversight for the investigation was provided by Mark R. Sylvester, Jorge Tenreiro and David Hirsch of the Crypto Assets and Cyber Unit, the release said.
The litigation efforts were led by Ben Kuruvilla, Michael Welsh and Christopher Carney, supervised by Ladan Stewart and Olivia Choe. Concurrently, the bankruptcy court proceedings were managed by Therese Scheuer and Patricia Schrage, under the supervision of Alistaire Bambach, according to the release.
