SEC sues Bittrex for offering OMG, ALGO, DASH and other tokens
Seattle-based cryptocurrency exchange Bittrex and its former CEO William Shihara have been sued by the U.S. Securities and Exchange Commission (SEC) for allegedly violating federal securities laws. The violations include operating as an unregistered exchange, broker, and clearing house.
According to the SEC’s complaint, Bittrex and its former CEO not only failed to comply with regulations in several areas, but also helped crypto issuers to remove specific statements that could have been seen as problematic from their public channels. That included price predictions and statements implying an “expectation of profit.”
The SEC’s complaint alleges that Bittrex was purposefully non-compliant since at least 2014, facilitating the buying and selling of crypto assets that were deemed as securities. The exchange earned over $1.3 billion in revenues, primarily from transaction fees collected between 2017 and 2022, while servicing American investors without registering any of these activities with the financial watchdog.
The lawsuit has specifically named omise go (OMG), algorand (ALGO), dash (DASH), tokencard (TKN), i-house token (IHT) and naga (NGC) as securities.
“As alleged in our complaint, Bittrex and issuers that it worked with knew the rules that applied to them but went to great lengths to evade them by directing issuer-applicants to ‘scrub‘ offering materials of information indicating that certain crypto assets were securities. Cosmetic alterations did nothing to change the underlying economic realities of the offerings and Bittrex’s conduct. Today we’re holding Bittrex accountable for its non-compliance,” said SEC Chair Gary Gensler.
“As laid out in our complaint, Bittrex’s business model was based on three things: circumventing the registration requirements of the federal securities laws; counseling issuers of crypto asset securities to do the same by altering their offering materials; and combining multiple market intermediary functions under one roof to maximize profits,” added Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
Having started operations nine years ago, Bittrex is ranked within the top 25 centralized exchanges in market volume. The exchange platform is available in over 50 countries and processes an average daily transaction volume of $23 million. Bittrex was established in 2014 by cybersecurity engineers Bill Shihara, Richie Lai and Rami Kawach.
The Seattle-based crypto firm revealed earlier this month that it plans to wind down operations in the United States and voluntarily liquidate because of the uncertain regulatory environment surrounding their business.
Customers of the exchange will be able to withdraw their assets and Bittrex encouraged them to do so within 30 days. Specifically, the platform suspended trading on April 14, 2023, but customers can withdraw all their verified balances by April 30, 2023.
