Crypto trading platform Bittrex Inc. has agreed to sanctions for violating securities law by operating as an unregistered exchange, broker and clearing agency.
The U.S. Securities and Exchange Commission (SEC) said Bittrex, its co-founder and former CEO, William Shihara, and a foreign affiliate, Bittrex Global GmbH, agreed to settle allegations that they violated securities registration requirements by allowing investors to trade cryptoassets.
The SEC also alleged that Bittrex and Shihara tried to skirt the issue about whether the cryptoassets being traded should be considered securities by directing issuers to “delete from public channels certain ‘problematic statements’ that Shihara believed would lead a regulator, such as the SEC, to investigate whether the cryptoasset was offered and sold as a security” before the assets could be listed for trading.
“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 Gurbir Grewal, director of the SEC’s division of enforcement, in a release.
“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,” he added.
Without admitting or denying the allegations, the firms agreed to pay US$24 million to settle the allegations, including disgorgement of US$14.4 million, prejudgment interest of US$4 million, and a US$5.6-million penalty.
They also consented to the entry of final judgments that permanently ban the firms and Shihara from further violations. The settlement remains subject to court approval.