Bittrex, a well-known cryptocurrency exchange, announced that it will close shop in the United States due to economic reasons and mounting pressure from regulators. Meanwhile, the Securities and Exchange Commission (SEC) subsequently filed a lawsuit against the company for a series of breaches.
The Lawsuit
According to Reuters, the SEC recently charged Bittrex for multiple offenses. These include allegedly running an unregistered national securities exchange, broker, and clearing agency. The complaint was filed in a U.S. district court in Washington on Monday, April 17. The lawsuit also dragged in the former CEO of the company, William Shihara.
The Nature of the Case
Based on the allegations, Bittrex was coordinating with cryptocurrency asset issuers to make their tokens available for trading on its platform. On the other hand, Shihara faced accusations of removing certain public statements that he thought would prompt regulators to scrutinize the said token offerings as securities.
Bittrex has reportedly earned at least $1.3 billion in revenues from transaction fees from investors, among other things, from 2017 to 2022 while servicing them as a broker, exchange, and clearing agency. However, the company failed to register these activities with the SEC.
In addition, the foreign affiliate of Bittrex, Bittrex Global GmbH, was accused of non-compliance with national securities exchange registration requirements due to its use of a single shared order book in conjunction with Bittrex.
The Defense of Bittrex
In response to the allegations, Bittrex Inc. denied offering or trading securities on its platform and claimed that it did not offer products that were investment contracts. Meanwhile, Bittrex Global revealed that it has no U.S. customers and plans to defend the allegations in court.
The company stated that it was founded on principles of security and compliance. Likewise, it emphasized that it takes great pride in its global reputation as one of the longest-standing and most compliant exchanges in the world.
SEC Chair Points Out the Main Issue Faced by the Crypto Market
SEC Chair Gary Gensler said that the lack of regulatory compliance, not a lack of regulatory clarity, is the primary issue faced by the crypto markets. In previous statements, the regulator has emphasized the need for companies that facilitate crypto transactions to register with the SEC just like other intermediaries in traditional markets.
Bittrex US Troubles and Exit
Bittrex had previously announced that it would shut down its U.S. operations on April 30 due to “continued regulatory uncertainty.” To date, the crypto exchange’s key operations abroad are headquartered in Liechtenstein.
From the looks of it, Bittrex is no longer a stranger to the scrutiny and penalties imposed by US regulators. Prior to the recent case filing, the company agreed to pay $29 million in fines to the U.S. Treasury Department for “apparent violations” of sanctions on certain countries and non-compliance to the provisions of anti-money laundering laws.
Final Thoughts
The SEC’s lawsuit against Bittrex highlights the regulatory clarity issues in the cryptocurrency space. Bittrex’s decision to no longer do business in the US and the subsequent lawsuit against the company by the SEC indicates that the regulatory and economic environment in the country has become too challenging for cryptocurrency exchanges.