SEC Charges Bittrex With Operating Unregistered National Securities Exchange

Crypto asset trading platform Bittrex and the Securities and Exchange Commission (SEC) are headed to court.

The SEC has charged Bittrex and its co-founder and former CEO William Shihara with operating an unregistered national securities exchange, broker and clearing agency, and the company’s subsidiary, Bittrex Global GmbH, for failing to register as a national securities exchange, the SEC said in a Monday (April 17) press release.

The commission alleged that Bittrex facilitated buying and selling of crypto assets that were offered and sold as securities; serviced investors as a broker, exchange and clearing agency without registering with the SEC; and worked to conceal its offering of securities from regulators, according to the release.

It also alleged that Bittrex Global should have registered as well because it operated a shared order book along with Bittrex, the release said.

“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 the release. “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.”

In a statement posted on Twitter, a Bittrex spokesperson said securities were not offered or traded on its platform and no products that were investment contracts were offered.

The statement added that for five years the firm sought notice of the specific conduct that the SEC thought violated federal securities laws but was not provided with that information.

“Specifically, on multiple occasions, we asked them to tell us what digital assets on our platform they viewed as securities, so that we could review and potentially delist them. They refused to do so,” the statement said. “Bittrex operated within the parameters of the law at all times, and we look forward to vindicating our position in court.”

Bittrex Global, too, said it will defend itself in court. The subsidiary said in a Monday press release that it has no U.S. customers, has made it clear to U.S. persons that they are not permitted to use its exchange, and is legally and operationally distinct from Bittrex U.S.

“Bittrex Global was willing to work productively with the SEC — as we do with all regulators — to explain our position,” the subsidiary said in the release. “It has become clear that the SEC is not interested in such discussions. As a result, Bittrex Global will instead make those explanations — which we anticipate will be compelling — to a court, as we vigorously defend these allegations in the U.S.”

As PYMNTS reported March 24, frictions between crypto businesses and U.S. regulators have reached a crescendo, with both sides growing increasingly loud in their criticisms of the other.