Bittrex has agreed to settle with SEC for $24 million without admitting or refuting the charges.
The U.S. Securities and Exchange Commission (SEC) announced on August 10 that the digital asset exchange Bittrex Inc. and its co-founder and former CEO, William Shihara, agreed to pay a $24 million fine to settle charges alleging they failed to register as a national securities exchange.
And The SEC Rolls On…
In April 2023, the SEC filed a claim against the U.S. Bittrex, alleging that the exchange’s operations fell under the definition of “an unregistered broker, exchange, and clearing agency.”
As detailed in the agency’s complaint, these activities primarily involved providing services to U.S. investors concerning crypto assets that the SEC claims were offered and sold as securities.
Bittrex and its former CEO, William Shihara, were accused of directing issuers to remove specific “problematic statements” from public channels before seeking to list their crypto assets on the Bittrex platform. Shihara served as the company’s CEO from 2014 to 2019.
The removal was believed to be an attempt to avoid regulatory scrutiny from regulators SEC, which could investigate whether the crypto assets were offered and sold as securities. The settlement terms involve neither the defendants admitting nor denying the allegations put forth by the SEC.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, commented, “For years, Bittrex worked with token issuers to ‘scrub’ their online statements of any indicia that they were investment contracts—all in an effort to evade the federal securities laws. They failed.”
He added that the settlement proves that you cannot avoid legal responsibility by simply changing the labels or descriptions of your products or services, “what matters is the economic realities of those offerings.”
Bittrex Is Still In Bankruptcy
Pending court approval, the settlement requires Bittrex and Shihara to follow permanent rules preventing violations of Sections 5, 15(a), and 17A of the Securities Exchange Act of 1934. Bittrex Global must also adhere to Section 5 of the same Act.
As part of the agreement, both Bittrex Inc. and Bittrex Global will pay a total of $24 million, which includes $14.4 million for restitution, $4 million in pre-judgment interest, and a $5.6 million civil penalty.
The case involved various units, including the Division of Enforcement’s Crypto Assets and Cyber Unit, the Market Abuse Unit, and the New York Regional Office. Legal experts managed the litigation process under the guidance of notable figures within the SEC. This settlement emphasizes the SEC’s commitment to enforcing rules for the ever-changing world of crypto assets.
Bittrex has not yet commented on the settlement. The exchange either admitted or refused the SEC’s claims. The exchange’s last public statements were in July regarding its bankruptcy proceedings.
Bittrex Declared Insolvency in May
The settlement came three months after Bittrex filed for Chapter 11 bankruptcy protection in May. The filing followed the firm’s announcement of ceasing operations in the U.S.
The crypto exchange reportedly has more than 100,000 creditors, with debts and assets estimated to be between $500 million and $1 billion, according to court filings shared by Randall Reese, founder of the bankruptcy tracking company Chapter 11 Dockets.
Bittrex is among the crypto service providers, including Celsius, Voyager, and BlockFi, that ended up in insolvency. Starting off the new year with struggles, the company allegedly fired over 80 employees in February. Bittrex then announced its departure from the U.S. planned for the end of April.
Despite the ongoing challenges, CEO Oliver Linch asserted no trouble faced by Bittrex Global. The company previously intended to fight against the SEC’s charges but the bankruptcy proceedings might challenge its efforts.
Given the fact that the crypto market is still luke-warm, at best, it may be some time before exchanges perk up, and start attracting investors again.
