The U.S. Securities and Exchange Commission (SEC) has charged Bittrex and its cofounder and former CEO William Shihara with operating an unregistered national securities exchange, merchant, and clearing agency. Separate charges were lodged against Bittrex Global.
The SEC has filed four Exchange Act violation allegations in the U.S. District Court for the Western District of Washington against the companies and Shihara.
Additionally, Bittrex Global is being accused “in connection with its operation of a single shared order book alongside Bittrex.”
In its complaint, the SEC argued that the Bittrex-traded OMG, Dash, Algorand, Monolith, Naga, and IHT Real Estate Protocol (IHT) tokens are securities.
In the past, the SEC has been criticized for its practice of “regulation by enforcement” by claiming tokens are securities only when it files such complaints and not beforehand.
The agency also asserts that Bittrex and Shihara advised clients to expunge “problematic statements” to avoid regulatory scrutiny.
In a jury trial, the SEC sought disgorgement, penalties, and permanent injunctions against the defendants.
The director of the SEC enforcement division, Gurbir Grewal, stated in a statement:
“Today’s action not only holds Bittrex accountable for misconduct that we allege put investors at risk, but should also send a message to other non-compliant crypto market intermediaries to follow the federal securities laws or be held accountable for their violations.”
Bittrex anticipated the SEC action and reportedly received a Wells Notice in March warning of the impending action.
The exchange had previously announced its intention to cease operations in the United States on April 30 due to the regulatory climate.
Bittrex released a statement that said, in part:
“For over five years, […] the SEC would not provide notice of the specific conduct that it thought violated the federal securities laws. Specifically, on multiple occasions, we asked them to tell us what digital assets on our platform they viewed as securities, so that we could review and potentially delist them. They refused to do so.”
The U.S. Treasury’s Office of Foreign Assets Control and Financial Crimes Enforcement Network charged Bittrex in October for violating sanctions programs and the Bank Secrecy Act.