Introduction: The SEC has announced a settlement involving Bittrex Inc., a prominent crypto asset trading platform, and its co-founder, William Shihara. The agreement pertains to charges of operating an unregistered national securities exchange, broker, and clearing agency. Bittrex Inc.’s foreign affiliate, Bittrex Global GmbH, is also included in the settlement, facing allegations of failing to register as a national securities exchange.
Bittrex’s Alleged Violations and Regulatory Scrutiny: The SEC’s complaint, lodged on April 17, 2023, in the U.S. District Court for the Western District of Washington, details Bittrex’s alleged activities as an unregistered broker, exchange, and clearing agency. This unlawful behavior revolves around Bittrex’s provision of services to U.S. investors concerning crypto assets that the SEC claims were offered and sold as securities.
The complaint further contends that Bittrex and its former CEO, William Shihara, who held the position from 2014 to 2019, directed crypto asset issuers seeking trading availability on Bittrex’s platform to remove specific “problematic statements” from public platforms. Shihara’s intention was to eliminate statements that might trigger regulatory inquiries, such as from the SEC, regarding whether a given crypto asset constituted a security. The terms of the settlement indicate that the defendants neither admit nor deny the SEC’s allegations.
SEC Director’s Statement on Accountability: Gurbir S. Grewal, the Director of the SEC’s Division of Enforcement, emphasized the consequences of these actions, stating, “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.” Grewal reiterated the SEC’s commitment to scrutinizing economic realities over mere labeling alterations, showcasing the SEC’s dedication to investor protection and market integrity.
Terms of the Settlement and Financial Implications: Pending court approval, the settlement mandates permanent injunctions against Bittrex and Shihara, prohibiting violations of Sections 5, 15(a), and 17A of the Securities Exchange Act of 1934. Additionally, Bittrex Global is barred from violating Section 5 of the same Act. A collaborative responsibility is established for Bittrex and Bittrex Global to make a comprehensive payment. This payment encompasses disgorgement, prejudgment interest, and a civil penalty, culminating in a substantial total monetary sum of $24 million.
Conclusion: This landmark settlement sends a resounding message to the crypto industry, emphasizing regulatory oversight and accountability. The resolution of these charges against Bittrex Inc., William Shihara, and Bittrex Global GmbH underscores the SEC’s commitment to upholding the integrity of the securities market and safeguarding investors’ interests.
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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.
