U.S. SEC sues veteran exchange Bittrex for illegally sharing orders with overseas subsidiaries

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Bittrex and its Foreign Subsidiaries Accused of Operating Unregistered Securities Exchanges

The U.S. Securities and Exchange Commission (SEC) on the 18thcharged crypto exchange platform Bittrex and its co-founder and former CEO William Shihara with operating national securities exchanges, broker-dealers, and clearing agencies without being registered. Bittrex is an established exchange founded in 2014.

Additionally, the SEC also accused Bittrex's foreign subsidiary, Bittrex Global GmbH, of not registering as a national securities exchange, involving its operation of a shared order book alongside Bittrex.

Side note: Bittrex Global GmbH is registered in the landlocked European country of Liechtenstein.

Bittrex Unregistered Activities Generated Over $1.3 Billion in Revenue

According to the SEC's allegations, starting from 2014, Bittrex has been facilitating the buying and selling of crypto assets considered securities issuance and sales. Between 2017 and 2022, Bittrex generated at least $1.3 billion in revenue from investors, including U.S. investors, through transaction fees, while providing broker-dealer, exchange, and clearing agency services to investors without being registered.

Bittrex and Former CEO Accused of Deleting "Problematic Statements" to Avoid Regulation

The charges also state that Bittrex and former CEO Shihara deleted some "problematic statements" while assisting issuers looking to trade crypto assets on the Bittrex platform to evade scrutiny from regulatory bodies like the SEC. To avoid regulatory review, Bittrex and Shihara requested applicants to remove statements related to investment terms such as "price predictions" and "profit expectations" before launching the asset on the platform.

SEC Chairman Gary Gensler stated that today's actions once again make clear that the issues in the crypto markets stem from a lack of regulatory compliance, not regulatory clarity.

Gary Gensler added that Bittrex and their collaborating issuers knew the rules that applied to them but sought to circumvent these rules by guiding issuers to remove certain information indicating the crypto assets were securities issuance. Furthermore, as alleged, Bittrex failed to register and comply with U.S. securities laws as an exchange, broker-dealer, and clearing agency. Their practices did not change the fundamental economic reality of these assets. Today, we hold Bittrex accountable for its non-compliant behavior.

The SEC pointed out that Bittrex and Bittrex Global should register as exchanges since they use a shared order book to aggregate orders from multiple buyers and sellers, execute trades in a non-discretionary manner, with both sides agreeing to the terms of the trade upon inputting these orders.

Additionally, the charges indicated that Bittrex should register as a clearing agency as it acts as an intermediary for payment and delivery, matches buy and sell orders, and holds customer assets. Finally, the charges stated that Bittrex should register as a broker-dealer as it frequently engages in business on behalf of others in the trading of crypto assets considered securities issuance and sales.