The U.S. Securities and Exchange Commission (SEC) announced on August 10, 2023, that it had reached a settlement with cryptocurrency trading platform Bittrex Inc., its co-founder and former CEO William Shihara, and its foreign entity Bittrex Global GmbH. The SEC had charged Bittrex entities and Shihara in April for operating an unregistered national securities exchange, broker, and clearing agency. Bittrex Global was also charged with failing to register as a national securities exchange.
Settlement Terms and Financial Penalties
Under the settlement, which is subject to court approval, the defendants have consented to permanent injunctions against future violations of securities laws. The financial component includes $14.4 million in disgorgement, $4 million in prejudgment interest, and a $5.6 million civil penalty, totaling $24 million to be paid jointly and severally by Bittrex and Bittrex Global.
SEC Accusations: 'Scrubbing' Statements to Evade Law
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated: “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.” This highlights the SEC's stringent view on platforms that facilitate compliance workarounds for token projects.
2023 Enforcement Wave Across Crypto Industry
The SEC has taken multiple enforcement actions against major crypto firms this year, including Binance and Coinbase. Coinbase, which attempted to have the charges dismissed last week, argued that the SEC had “overstepped” its statutory authority. Reports indicate the SEC asked Coinbase to delist all crypto tokens except bitcoin to comply with securities laws. SEC Chairman Gary Gensler, criticized for his enforcement-heavy approach, maintains that all crypto tokens except bitcoin are securities, labeling the sector as highly speculative and rife with fraud.
Upcoming Appeal in Ripple Case
The SEC has also revealed plans to appeal the Ripple ruling by District Judge Analisa Torres concerning XRP. According to Gensler, the SEC believes parts of the Ripple decision were “wrongly decided.” This underscores the regulator's commitment to pursuing legal precedents that align with its interpretation of securities laws.
The Bittrex settlement serves as a stark warning to crypto platforms that attempt to circumvent regulatory requirements, reinforcing the SEC's resolve to enforce securities laws across the digital asset ecosystem.