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Bittrex, SEC Reach Settlement In Securities Violation Case

Another crypto firm, Bittrex, bites the dust in the SEC’s continued clampdown on major players in the crypto industry amidst regulatory uncertainty. The regulator has been known to come hard at these crypto firms because it believes they aren’t toeing an almost non-existent regulatory framework. 

Bittrex Succumbs To SEC

In a press release dated August 10, the United States Securities and Exchange Commission (SEC) announced that crypto exchange Bittrex and its former CEO William Shihara have agreed to a $24 million monetary settlement with the regulator. According to the statement, Bittrex’s international affiliate company Bittrex Global GmbH also agreed to settle the charge of failing to register as a national securities exchange.

The SEC had alleged that the crypto exchange and its former CEO operated an “unregistered national securities exchange, broker, and clearing agency.” It argued that the exchange violated securities laws when it offered and allowed US investors to invest in crypto assets, which it deems as securities (The SEC has continued to allege that tokens like MATIC, SOL, ADA, and XRP are securities). 

Furthermore, the agency accused the firm and its former CEO of going as far as to cover their tracks in order to escape regulatory scrutiny. The SEC’s complaint stated Shihara directed token issuers, who wanted their tokens listed on the exchange, to remove “problematic statements,” which could lead any regulator to investigate whether or not the company offered and sold securities on the platform.

The settlement news may come as a surprise considering many thought the SEC was going to experience a pushback from the crypto exchange. This is because Bittrex had earlier argued that the SEC had no authority to regulate tokens traded on its platform due to a lack of clear-cut law by Congress authorizing the regulator to do so. 

SEC Might Be Killing The Crypto Economy

Besides Bittrex, the SEC is currently embroiled in legal battles against the world’s biggest cryptocurrency exchanges, Binance and Coinbase. Similarly, it accuses these exchanges of offering and selling securities on their platform without registering with the agency.

While many may argue that the SEC is simply doing its job of protecting the interests of US investors, others may take a different point of view by arguing that the SEC is simply killing the Web3 economy in the country. For instance, Bittrex, before filing bankruptcy in the US, had earlier shut down its US operations due to “continued regulatory uncertainty.” 

This unfavorable regulatory environment is undoubtedly one of the reasons why some other crypto firms have also chosen to take their operations abroad instead of being domiciled in the US, especially with the fact that other countries are putting crypto-friendly guidelines in place on how crypto exchanges should conduct their operations. 

For this reason, Congress needs to step in and pass clear-cut laws that stipulate whether or not crypto exchanges fall under the purview of the SEC, and if yes, it needs to also address whether crypto assets are securities or not. 

Crypto total market cap chart from Tradingview.com (Bittrex)

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Cryptocurrency Exchange Bittrex Files For Bankruptcy Amid SEC Probe

The popular crypto trading exchange Bittrex filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware. This move comes three weeks after the United States Securities and Exchange Commission filed a lawsuit against it.

The US SEC charged Bittrex and its co-founder and former CEO, William Shihara, for allegedly operating an unregistered national securities Exchange, clearing agency, and broker house. It also filed another charge against Bittrex Global. 

Bittrex Trading Platform Bankruptcy Details

According to the filing, the crypto exchange has over 100,000 creditors. Its assets were between $500 million and $1 billion, while the liabilities were between $500 million and $1 billion.

The bankruptcy filing covered different entities under Bittrex, including, Seattle-based entity Bittrex Inc, Bittrex Global GmbH, 2 entities in Malta, and an affiliated entity Desolation Holdings LLC. But Bittrex’s global entity based in Liechtenstein was not part of the bankruptcy filing. 

Regarding its creditors, the bankruptcy filing revealed that OFAC topped the list among others with a claim of $24.2 million. Other Bittrex creditors include a crypto wallet with a claim of $14.5 million.

Cryptocurrency Exchange Bittrex Files For Bankruptcy Amid SEC Probe

Notably, FinCen is the top 50 creditor with a claim of $3.5 million, while the US SEC has an “undetermined amount of claims.” 

SEC Lawsuit And Bankruptcy Filing Follows Bittrex Plans To Wind Down

Bittrex exchange has had it very rough in 2023. The firm first reduced its workforce in February, laying off 83 employees. According to the trading platform, the market crash and the collapse and bankruptcy of many crypto firms in 2022 affected its operations. 

Some of the crypto exchanges and lending platforms that were also affected by the market were Celsius, Voyager Digital, and the FTX exchange crash that wreaked havoc in the industry. 

Later in March, Bittrex announced plans to wind down its US operations by April 30 due to regulatory uncertainty. In the announcement, Bittrex assured customers their funds were safe but advised US customers to withdraw them before the slated date. 

By April 17, the US SEC filed a lawsuit against the firm, alleging it operated an exchange for buying, selling, and trading crypto asset securities without proper registration. Three weeks after the lawsuit, the crypto exchange filed for bankruptcy.

Notably, while responding to a Twitter post about the lawsuit, the lawyer representing thousands of XRP holders, John Deaton, blamed the SEC Chair Gary Gensler for Bittrex’s decision.

Featured image from Pexels and chart from Tradingview.com