SEC charges cryptocurrency exchange Bittrex and former CEO William Shihara

The U.S. Securities and Exchange Commission today charged cryptocurrency company Bittrex Inc., as well as former Chief Executive Officer William Shihara, for operating an unregistered securities exchange.

The agency filed the complaint with the U.S. Distinct Court in Western Washington. Earlier this year, the SEC stated that it believes many popular cryptocurrencies could be considered securities. Companies that trade in securities must register their activities with the agency. According to the SEC, Bittrex has failed to meet that requirement.

Bittrex launched in 2014 and subsequently became one of the world’s 50 largest cryptocurrency exchanges. According to the SEC, the company generated $1.3 billion in revenue between 2017 and 2022. Shihara, one of the original co-founders, was the company’s CEO from its launch until 2019.

The SEC is accusing Bittrex of running an unregistered securities exchange. Moreover, the company is being charged with operating as an unregistered broker and clearing agency. A broker coordinates securities transactions between investors, while a clearing agency manages the logistics involved in carrying out those transactions.

The SEC is also charging Shihara in connection with the matter. Bittrex provided a feature that allowed users to issue new cryptocurrencies through its platform. According to the SEC, Shihara instructed cryptocurrency issuers to delete statements containing “investment related terms” so as to avoid drawing the attention of regulators.

The final charge in the SEC’s complaint focuses on a Liechtenstein-based affiliate called Bittrex Global GmbH. That company, the agency alleges, also failed to register as a securities exchange. The SEC pointed out that Bittrex and Bittrex Global used a shared order book, a database that tracks information about cryptocurrency transactions.

The cryptocurrency exchange operator had reportedly stated ahead of today’s charges that it was planning to shutter its U.S. operations on April 30. Bittrex cited “continued regulatory uncertainty” as the reason. Last October, the company was fined $53 million by the U.S. Treasury Department over its business practices.

“Today’s action, yet again, makes plain that the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity,” said SEC chair Gary Gensler. “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.”

Bittrex is one of several cryptocurrency exchanges facing scrutiny from the SEC. Last month, the agency notified Coinbase Global Inc. that some of its cryptocurrency services may violate U.S. securities law. Earlier, SEC officials charged Genesis Global Capital LLC and Gemini Trust Co. LLC with illegally selling securities through a joint cryptocurrency lending program. 

Photo: Unsplash