Crypto exchange Bittrex will pay the Securities and Exchange Commission $24 million to settle charges it operated an unregistered national securities exchange, broker and clearing agency, the regulator announced Thursday.
The exchange’s foreign affiliate, Bittrex Global GmbH, will settle charges, too, that it failed to register as a national securities exchange.
The settlement resolves SEC allegations from April 17 that Bittrex and former CEO Bill Shihara, from 2014 to 2019, directed U.S. investors to delete certain “problematic statements” from public channels believed by Shihara to lead regulators to investigate whether the crypto asset was offered and sold as a security.
“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,” said SEC Division of Enforcement Director Gurbir Grewal.
“Today’s settlement makes clear that you cannot escape liability by simply changing labels or altering descriptions because what matters is the economic realities of those offerings,” Grewal said. “I am grateful to the SEC staff for aggressively pursuing non-compliance in the crypto industry, resolving this matter, and bringing additional relief to harmed investors.”
Bittrex, Shihara and Bittrex Global neither admitted nor denied the SEC’s allegations. Shortly before after the allegations came out in April, Bittrex announced it would be winding down U.S. operations due to regulatory uncertainty, noting that running the exchange in the U.S. current “regulatory and economic environment” was not “economically viable.”
Three weeks after the SEC’s allegations, the exchange filed for bankruptcy.
“The lack of regulatory clarity in the U.S. created a substantial negative economic impact on the digital asset industry and resulted in overlapping regulatory burdens and soaring regulatory costs, on both the state and federal level,” Bittrex’s co-chief restructuring officer, Evan Hengel, said at the time.
That left Bittrex to face “an untenable regulatory and economic environment that compelled them to initiate a restructuring process and an orderly wind down of their U.S. operations,” Hengel said.
Thursday’s settlement was a “good outcome,” Shihara said, in a prepared statement emailed to Banking Dive.
“It’s vital that our country strikes a balance between fostering innovation, encouraging entrepreneurs and the need to protect consumers, and I hope today’s proposed settlement helps move that forward,” he said.
