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Bittrex and its former CEO William Shihara were charged with running an unregistered national securities exchange, brokerage, and clearing agency by the US Securities and Exchange Commission on Monday.
Generally speaking, if you run a stock exchange in the United States, you must register as a national stock exchange with the US Securities and Exchange Commission. The SEC must be satisfied with the openness and transparency of your exchange's rules before you may operate there.
It's possible to disagree on what constitutes a stock market. The definition of an exchange is nebulous in contemporary finance, but generally speaking, it serves as a meeting place for stock buyers and sellers.
Dark pools and alternative trading systems are two examples of entities resembling stock exchanges but not technically stock exchanges.
But they also have an SEC registration and are subject to SEC oversight. Not to mention stockbrokers: To the average investor, a broker's website and mobile app – like Robinhood – can feel and look a lot like a stock exchange.
However, broker-dealers must be registered with the SEC, and laws separate them from exchanges (a broker typically does not provide a platform for customers to trade with each other but directs orders to other market venues).
Clearing houses for stocks (those who actually move shares from a seller to a buyer) must also sign up. In addition, the SEC requires registration from anything resembling a stock exchange.
The SEC has filed a complaint with a federal court in Washington, DC, alleging that Shihara conspired with those seeking to list their digital tokens for trading on Bittrex to remove disclosures that Shihara believed could prompt a securities investigation.
Bittrex Global GmbH, a foreign affiliate, was also charged by the SEC for failing to register as a national securities exchange for operating a single shared order book with Bittrex.
But Bittrex said it does not provide or exchange securities or investment contracts on its platform.
And Bittrex Global released a statement saying it has no US customers and will "vigorously defend" itself against the SEC's claims.
The crypto firm, in its statement, said, "Bittrex Global was founded upon principles of security and compliance -- and we take great pride in our global reputation as one of the longest-standing and most compliant exchanges in the world."
From 2017 through 2022, Bittrex allegedly collected at least $1.3 billion in income from investor transaction fees while acting as a broker, exchange, and clearing agency without being registered with the SEC.
Seattle-based cryptocurrency exchange Bittrex had stated it will cease operations in the United States as of April 30 owing to "continued regulatory uncertainty." Liechtenstein is home to the company's non-American operations.
"Today's action, yet again, makes plain that the crypto markets suffer from a lack of regulatory compliance, not a lack of regulatory clarity," said SEC Chair Gary Gensler.
Gensler has previously said that Bitcoin transaction facilitators should be required to register with the SEC.
For "apparent violations" of sanctions on specific nations and anti-money laundering law, Bittrex settled with the United States Treasury Department in October and agreed to pay US$29 million in fines.
The cryptocurrency exchange, Bittrex, created in 2014 by three former employees of Amazon, had earlier announced that it would cease operations in the United States, stating that the regulatory climate had rendered it "no longer feasible" to do so business there.
Bittrex is the latest digital-asset firm to leave the country amid heightened regulatory scrutiny over the industry.
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