Breaking: Bittrex Crypto Exchange and Ex-CEO Hit with US SEC Lawsuit Over Accusations of Federal Law Breaches

The US Securities and Exchange Commission (SEC) has leveled serious allegations against cryptocurrency trading platform Bittrex, its co-founder, and former CEO William Shihara for operating an unregistered national securities exchange, broker, and clearing agency. In addition, Bittrex’s foreign affiliate, Bittrex Global GmbH, faces charges for failing to register as a national securities exchange while operating a single shared order book with Bittrex.

Bittrex Promoted Illegal Crypto Asset Trading Since 2014

Operating since at least 2014, Bittrex reportedly facilitated crypto asset trading that the SEC claims were offered and sold as securities. The platform allegedly generated $1.3 billion in revenues from transaction fees and other sources between 2017 and 2022, servicing investors, including those from the US, without registering the required activities with the SEC.

The complaint highlights that Bittrex and Shihara, CEO from 2014 to 2019, allegedly collaborated with issuers seeking to trade their crypto assets on Bittrex’s platform. They reportedly instructed the issuers to delete public “problematic statements” that could lead regulators, such as the SEC, to investigate the asset as a security offering. This move was apparently aimed at avoiding regulatory scrutiny.

SEC Chair Gary Gensler stated that the complaint showcases the crypto market’s lack of regulatory compliance, not a lack of clarity. Bittrex and the issuers involved reportedly knew the rules but evaded them. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized that Bittrex allegedly prioritized profits over investor protection, with a business model that put investors at risk.

The press release stated, “The SEC also charged Bittrex, Inc.’s foreign affiliate, Bittrex Global GmbH, for failing to register as a national securities exchange in connection with its operation of a single shared order book along with Bittrex.”

SEC Chair and Enforcement Director Weigh In

Last month, Bittrex disclosed its intention to leave the US market by April’s end, attributing the decision to the “current US regulatory and economic environment.” Over the past weekend, the company provided further details, as general counsel David Maria informed the Wall Street Journal that Bittrex had received a Wells Notice in March. This notice indicates that the SEC’s Enforcement Division has discovered evidence of legal violations.

Gurbir S. Grewal, the Director of the SEC’s Division of Enforcement, stated, “We allege that Bittrex consistently prioritized profits over the protection of investors.”

He further explained that the SEC’s complaint against Bittrex outlines the company’s business model, which was allegedly built on three key aspects: evading federal securities laws’ registration requirements, advising crypto asset security issuers to do the same by modifying their offering materials and consolidating multiple market intermediary roles to optimize profits. 

Grewal emphasized that the SEC’s actions against Bittrex not only hold the company responsible for alleged misconduct that put investors at risk but also serves as a warning to other non-compliant crypto market intermediaries to adhere to federal securities laws or face the consequences of their violations.

The SEC’s lawsuit against Bittrex bears similarities to its recent action against Beaxy, a company that settled comparable charges. It also hints at the potential charges the SEC may bring against Coinbase (COIN), the largest US exchange, which received a Wells Notice last month as well.

Filed in the US District Court for the Western District of Washington, the SEC’s complaint alleges that Bittrex and Bittrex Global should have registered as exchanges, clearing agencies, and brokers. The SEC’s investigation and litigation are ongoing, with potential consequences for other non-compliant crypto market intermediaries.