Crypto Asset Trading Platform Bittrex and Former CEO to Settle SEC Charges for Operating an Unregistered Exchange, Broker, and Clearing Agency

The Securities and Exchange Commission (SEC) has officially announced a settlement with Bittrex Inc., a prominent crypto asset trading platform, and its co-founder and former CEO, William Shihara. The settlement revolves around allegations of operating an unregistered national securities exchange, brokerage, and clearing agency. Bittrex Global GmbH, a foreign affiliate of Bittrex Inc., is also involved in the settlement due to its failure to register as a national securities exchange.

According to the SEC’s complaint, which was lodged on April 17, 2023, in the U.S. District Court for the Western District of Washington, Bittrex was found to have engaged in activities characteristic of an unregistered broker, exchange, and clearing agency. These activities involved providing services to U.S. investors in relation to crypto assets that the SEC claims were presented and sold as securities. The complaint further alleges that Bittrex and its former CEO, Shihara, who held the position from 2014 to 2019, instructed issuers aiming to list their crypto assets on Bittrex’s platform to eliminate certain “problematic statements” from public platforms. Shihara believed that these statements could trigger regulatory scrutiny, such as from the SEC, into whether the crypto assets were actually securities. The settlement stipulates that the defendants do not admit or deny the allegations made by the SEC.

Gurbir S. Grewal, the Director of the SEC’s Division of Enforcement, emphasized the issue: “Bittrex attempted to cleanse online statements made by token issuers to remove any signs that they were dealing with investment contracts, all in an attempt to evade federal securities laws. However, their efforts were unsuccessful. This settlement sends a clear message that relabeling or altering descriptions is insufficient; what truly matters is the underlying economic nature of these offerings. I extend my gratitude to the dedicated SEC staff for their robust pursuit of regulatory compliance within the cryptocurrency industry. Through resolving this case, they have brought about redress for affected investors.”

Pending court approval, the settlement entails various actions. Bittrex and Shihara have consented to permanent injunctions that prohibit them from violating Sections 5, 15(a), and 17A of the Securities Exchange Act of 1934. Additionally, Bittrex Global is prohibited from contravening Section 5 of the same Act. Both Bittrex and Bittrex Global are collectively liable for the settlement’s financial terms. This includes a disgorgement amounting to $14.4 million, pre-judgment interest totaling $4 million, and a civil penalty of $5.6 million, culminating in a total payment of $24 million.