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

Bittrex, Inc., a crypto asset trading platform, and its co-founder and former CEO, William Shihara, have been charged by the Securities and Exchange Commission (SEC) for operating an unregistered national securities exchange, broker, and clearing agency. The SEC also charged Bittrex Global GmbH, a foreign affiliate of Bittrex, Inc., for failing to register as a national securities exchange for its operation of a shared order book with Bittrex. The complaint alleges that Bittrex has been offering and selling crypto assets as securities since at least 2014 without registering any of these activities with the Commission. The company earned over $1.3 billion in revenues from transaction fees, servicing US investors as a broker, exchange, and clearing agency. The SEC alleges that Bittrex and Shihara instructed issuers to delete certain statements related to “price prediction[s],” “expectation of profit,” and other “investment-related terms” before making an asset available on its platform to avoid regulatory scrutiny.

Gary Gensler, the SEC Chair, stated that “the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity.” The SEC’s complaint, filed in the US District Court for the Western District of Washington, alleges that Bittrex should have registered as an exchange, clearing agency, and broker. The SEC’s Director of Enforcement, Gurbir S. Grewal, said that “Bittrex repeatedly chose profits over investor protection” and that the company’s business model was based on circumventing registration requirements, counseling issuers of crypto asset securities to do the same, and combining multiple market intermediary functions under one roof to maximize profits. The SEC’s investigation was conducted by the Crypto Assets and Cyber Unit and the Market Abuse Unit, and the litigation is being supervised by Ladan Stewart and Olivia Choe.