Bittrex charged with unregistered operations, 6 tokens securities by SEC

By: Henry Felix

April 18, 2023 5:57 AM

As Bittrex prepares to cease operations in the United States, the Securities and Exchange Commission has filed a complaint against the Seattle-based exchange.

The SEC has filed charges against Bittrex and its former CEO and co-founder William Shihara for running an unlicensed national securities exchange, broker, and clearing agency. Bittrex Global was charged separately by the agency.

The SEC has filed four Exchange Act breaches allegations against the firms and Shihara in the United States District Court for the Western District of Washington. Bittrex Global is also being penalized for "operating a single shared order book alongside Bittrex."

The SEC claimed→ in its complaint that the Bittrex tokens OMG, Dash, Algorand, Monolith (TKN), Naga (NGC), and IHT Real Estate Protocol (IHT) are securities. The SEC has been chastised in the past for engaging in "regulation by enforcement," asserting that tokens are securities only after such complaints are filed, rather than before.

According to the agency, Bittrex and Shihara reportedly urged clients to erase "problematic remarks" in order to evade regulatory investigation. In a jury trial, the SEC complaint seeks disgorgement, penalties, and permanent injunctions against the defendants. In a statement→, SEC Enforcement Division Director Gurbir Grewal said:

"Today's lawsuit not only makes Bittrex accountable for misbehavior that we believe put investors at risk, but should also send a message to all non-compliant cryptocurrency market operators to respect the federal securities laws or be held accountable for their breaches."

Bittrex had anticipated the SEC investigation and apparently got a Wells notification in March warning it of the forthcoming action. Due to the regulatory environment, the exchange had already declared its intention to terminate its U.S. operations on April 30.

Bittrex issued the following statement:

"For more than five years, [...] the Securities and Exchange Commission (SEC) refused to disclose notice of the particular conduct that it believed violated the federal securities laws. Specifically, we requested them numerous times to identify any digital assets on our platform that they considered to be securities so that we might investigate and potentially delist them. They flatly refused."

In October, the US Treasury's Office of Foreign Assets Control and Financial Crimes Enforcement Network charged Bittrex with violating sanctions programs and the Bank Secrecy Act.