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SEC Gets a Win: Bittrex Pays $24M for Operating as Unregistered Securities Exchange

Last Updated August 11, 2023 1:59 PM
Teuta Franjkovic
Last Updated August 11, 2023 1:59 PM
Key Takeaways
  • As part of a settlement, Bittrex has consented to pay $24 million to the SEC
  • On May 8, Bittrex’s US division filed for Chapter 11 bankruptcy

The cryptocurrency exchange Bittrex has agreed  to pay a $24 million fine within two months after filing a liquidation plan for the exchange on Thursday, August 10, to resolve allegations from the SEC that it provided access to unregistered securities to American investors.

Company is ‘Delighted’ to Settle Things So Quickly

Bittrex Global told CCN that the company is delighted to have reached a settlement agreement with the SEC so quickly following the submission of our motion to dismiss.

“The agreement has now been submitted to the court for approval, and we will be able to comment further once that process is complete,” Bittrex concluded.

The SEC sued Bittrex  earlier this year after it declared bankruptcy in May, alleging that it operated a securities exchange, broker, and clearinghouse at the same time without registering as any of these things with the regulatory body.

Authorities claimed  that William Shihara, co-founder of Bittrex and its former CEO, instructed issuers who wanted to make their cryptocurrency assets available for trading to remove “problematic statements”—those relating to price forecasts, expectations of profit, and other investment-related terms—from public channels because Shihara thought such wording would prompt an investigation by authorities.

The Result Is Favorable

However, Shihara commented  that this result is favorable. He said he is hoping that this proposed settlement will help the nation achieve the balance that is necessary between fostering innovation, supporting entrepreneurs, and the need to safeguard consumers.

The SEC has made Similar allegations against Coinbase and Binance, two other cryptocurrency exchanges in the US. The SEC also claimed Bittrex ordered cryptocurrency issuers to remove any public remarks that would imply their tokens might violate securities laws.

According to the court document  filed on Thursday, Bittrex will not acknowledge or reject the accusations and is prohibited from making any public remarks that would imply the SEC’s charges lacked any foundation in reality. The disgorgement, prejudgment interest, and civil money penalties total $14.4 million of the $24 million amount, which also includes $4 million in prejudgment interest on the disgorgement.

Bittrex has 90 days from when its liquidation plan goes into force to pay the SEC, but if it doesn’t by March 1 of the following year, the regulator may file a lawsuit.

“Defendants agree that, with respect to Bittrex, the terms of the settlement reflected in this Consent and in the Judgment are subject to approval by the Bankruptcy Court in the Bankruptcy Case and shall be treated as an allowed, unsecured claim under the terms of any Plan filed by Bittrex in the Bankruptcy Case,” the filing stated .

Gurbir Grewal, the director of SEC enforcement, said in a statement that the settlement “makes clear that you cannot escape liability by simply changing labels or altering descriptions because what matters are the economic realities of those offerings.” “I am appreciative of the SEC staff for pursuing non-compliance in the cryptocurrency industry aggressively, resolving this issue, and providing additional relief to harmed investors,” he said.

The SEC initially charged Bittrex  around four months ago with failing to register as a national securities exchange, and now there has been a settlement. The company’s alleged efforts to slant the marketing language concerning its products were closely examined by the prosecution.

In addition, the SEC’s complaint then claimed that Bittrex neglected to register its services with the SEC while earning at least $1.3 billion in transaction fees from investors between 2017 and 2022 while acting as their broker, exchange, and clearing agency.

SEC Chair Gary Gensler then stated  that this move “makes plain that the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity.”

Last Year Bittrex Paid $29M Penalty to U.S. Treasury Department

Companies that assist in facilitating transactions in the Bitcoin market, according to Gensler, should register with the SEC like other market intermediaries.

In October last year, Bittrex agreed to pay a $29 million fine  to the U.S. Treasury Department for “apparent violations” of the law’s anti-money laundering provisions and sanctions against specific nations.

Bittrex is the latest cryptocurrency company to come under pressure from the SEC, which claims that all cryptocurrencies, with the exception of bitcoin, should be regarded as securities under the law.

Prosecutors filed charges against crypto celebrity Richard Heart late last month, alleging that he raised more than $1 billion in unregistered securities illegally and spent investor money on pricey items including a rare 555.55-carat black diamond.

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