Bittrex, a cryptocurrency exchange based in the Seattle area, has responded to a lawsuit filed by the U.S. Securities and Exchange Commission (SEC), arguing that the legal action is part of regulators’ “broader campaign to push cryptocurrency out of the United States.”
The lawsuit, submitted on Monday in the U.S. District Court in Seattle, accuses Bittrex and its former CEO of intentionally employing tactics to evade regulatory oversight, while operating as an unregistered broker, national securities exchange, and clearing agency.
The suit claims that “Bittrex has persistently defied regulatory frameworks and circumvented the disclosure requirements that Congress and the SEC have established over decades to protect national securities markets and investors.”
In response, Bittrex issued a statement asserting that it neither offered nor traded securities on its trading platform nor provided products that constituted investment contracts.
The SEC has also charged Bittrex Global, a foreign affiliate of Bittrex, for maintaining a single shared order book with Bittrex without registering as a national securities exchange. William Shihara, the former CEO and co-founder, is named as a defendant as well.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated in a release, “As laid out in our complaint, Bittrex’s business model was based on three things: circumventing the registration requirements of the federal securities laws; counseling issuers of crypto asset securities to do the same by altering their offering materials; and combining multiple market intermediary functions under one roof to maximize profits”
The lawsuit further claims that Bittrex guided issuers of crypto asset securities to eliminate language in public statements that could draw the attention of the SEC.
The SEC contends that Bittrex had a financial motive to list additional assets on its platform in order to boost revenue. According to the charges, between 2017 and 2022, Bittrex generated over $1.3 billion in transaction fees from investors. Furthermore, the SEC alleges that Shihara’s compensation amounted to at least $130 million from April 2017 to March 2020.
“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
In the previous month, Bittrex declared the closure of its U.S. operations, with CEO Richie Lai citing that “it’s just not economically viable for us to continue to operate in the current U.S. regulatory and economic environment.”
The SEC is closely examining numerous other crypto companies and exchanges, including Coinbase.
In October, the U.S. Treasury Department imposed approximately $29 million in fines on Bittrex. The company allegedly permitted individuals from sanctioned regions to utilize its platform and failed to comply with anti-money laundering requirements.
