SEC Charges Crypto Trading Platform Beaxy and its Executives for Operating an Unregistered Exchange, Broker, and Clearing Agency

The Securities and Exchange Commission (SEC) has charged crypto asset trading platform and its executives for failing to register as a national securities exchange, broker, and clearing agency. Beaxy’s founder, Artak Hamazaspyan, and his company, Beaxy Digital, Ltd., were also charged with raising $8 million in an unregistered offering of the Beaxy token (BXY) and allegedly misappropriating at least $900,000 for personal use. Market makers operating on the Beaxy platform were also charged as unregistered dealers.

The SEC’s complaint states that Windy Inc., through Nicholas Murphy and Randolph Bay Abbott, provided the Beaxy platform as a web-based trading platform since October 2019, which facilitated buying and selling of crypto assets that were offered and sold as securities. The complaint alleges that Windy, through the Beaxy platform, violated the Securities Exchange Act of 1934 by acting as an intermediary in making payments and deliveries upon matching sell and buy orders, bringing together the orders for securities of multiple buyers and sellers using established, non-discretionary methods, and regularly engaging in the business of effecting transactions for the account of others in crypto assets that were offered and sold as securities.

The SEC alleges that Murphy and Abbott continued to operate the Beaxy platform through Windy after convincing Hamazaspyan to resign following the unregistered offering of BXY and the misappropriation of investor assets. Thus, they are also liable for operating an unregistered exchange, broker, and clearing agency.

Additionally, Windy entered into an agreement with Brian Peterson and his companies to provide market making services for BXY, and the complaint alleges that Peterson and the Braverock Entities acted as unregistered dealers.

As part of the consent filed in the US District Court for the Northern District of Illinois, Windy, Murphy, Abbott, and Peterson have agreed to cease all activities as an unregistered exchange, clearing agency, broker, and dealer; shut down the Beaxy platform; provide an accounting of assets and funds for the benefit of customers; transfer all customer assets and funds to each respective customer; and destroy any and all BXY in Windy’s possession.

Windy, Abbott, and Murphy agreed to pay a total of $79,200 in civil penalties, while Peterson agreed to pay a civil penalty of $6,600. The Braverock Entities agreed to jointly and severally pay a penalty of $80,000. In addition, Windy agreed to pay $10,779 in disgorgement plus prejudgment interest, and the Braverock Entities agreed to jointly and severally pay $52,000 in disgorgement plus prejudgment interest. The SEC is litigating its charges against Hamazaspyan for securities fraud and against Hamazaspyan and Beaxy Digital for the unregistered offering of BXY.