SEC accuses former CEO Bittrex of operating an unregistered stock exchange

The Securities and Exchange Commission (SEC) filed a complaint against Bittrex on Monday, alleging the Seattle-based exchange failed to comply with securities law by failing to register with the financial watchdog in several areas.

The SEC’s criminal complaint alleges that the exchange failed to register as a broker, exchange and clearing agency, collecting at least $1.3 billion in illicit revenue between 2017 and 2022.

The lawsuit names Bittrex, Bittrex Global, and Bittrex co-founder and former CEO Bill Shihara.

The enforcement action comes after Bittrex announced it was to extinguish at the end of last month, asking users to withdraw their funds from the platform by the end of this month.

“Bittrex has for years defied regulatory structures and evaded disclosure requirements that Congress and the SEC have built over decades to protect national securities markets and investors,” the lawsuit states.

The SEC’s attempt to sue Bittrex represents the latest development in a set of implementing measures brought by US regulators, targeting several cryptocurrency exchanges so far this year, among other native companies in the digital asset industry.

Kraken and Coinbase have found themselves squarely in the SEC’s crosshairs over cryptocurrency staking-related products, while the Commodity Futures Trading Commission has sued Binance for violating several derivatives trading rules.

“Today’s action, again, makes it clear that crypto markets are suffering from a lack of regulatory compliance, not a lack of regulatory clarity,” the SEC Chairman said. Gary Gensler, in a statement. Press release. “Today we hold Bittrex accountable for its non-compliance.”

Tokens on Bittrex in the spotlight

The lawsuit notes that since the exchange’s inception, it has offered over 300 digital assets to investors.

And although “many crypto assets tradable on the Bittrex platform have characteristics” that allegedly resemble securities, the lawsuit specifically names six tokens as examples on Bittrex that include OMG Network (OH MY GOD), Dash (DASH), Algorand(SOMETHING), Monolith (TKN), Naga (NGC) and Real Estate Protocol (IHT).

Algorand is by far the largest token named in the lawsuit by market capitalization, ranked 42nd among all tokens at $1.6 billion, according to CoinGecko.

While the token was already in the red, Algorand fell further after the lawsuit was released, dropping 2.5% to $0.22 over the past day.

SEC lawsuit accuses Bittrex not only of failing to register, but also of putting profits above protecting investors by listing certain tokens, well aware of what to avoid in terms of scrutiny potential of the SEC.

During his tenure as CEO of Bittrex, Shihara has been at the forefront of a campaign within the company to clean up “problematic claims”, where the exchange has ordered issuers of digital assets to clean up public statements of language that would raise eyebrows at the SEC, the lawsuit alleges.

However, even though it started removing some crypto assets from its platform to avoid SEC scrutiny in April 2019, the exchange reportedly brought some back in an effort to “stay relevant,” including DASH and OMG.

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