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The Securities and Exchange Commission said crypto asset trading platform Bittrex Inc. and its former CEO, William Shihara, agreed to settle charges that they operated an unregistered national securities exchange, broker, and clearing agency. Bittrex Inc.’s foreign affiliate, Bittrex Global GmbH, also agreed to settle charges that it failed to register as a national securities exchange.
SEC Allegations: The SEC said Bittrex provided services to U.S. investors in connection with crypto assets that the agency’s complaint alleges were offered and sold as securities. The complaint also alleges that Bittrex and Shihara directed issuers who sought to have their crypto assets made available for trading on Bittrex’s platform to first delete from public channels certain “problematic statements” that would lead regulators to investigate whether the crypto asset was offered and sold as a security.
Settlement Details: Under the settlement, which is subject to court approval, the defendants consented to final judgments that permanently enjoin Bittrex and Shihara from violating sections of the Securities Exchange Act of 1934. In addition, Bittrex and Bittrex Global agreed to a total monetary payment of $24 million.
SEC Exchange Proposal: In a comment letter to the SEC in June, ICBA expressed support for the agency’s proposal to confirm that crypto exchanges are included in its definition of “exchange,” requiring them to follow the same rules as other entities that trade securities. The proposal would include in the definition trading systems that trade crypto asset securities and that use distributed ledger or blockchain technology, including systems characterized as being decentralized.
Existing Rules for Crypto: When the SEC reopened the comment period on its proposal in April, the agency reiterated the applicability of existing rules to crypto platforms. SEC Chair Gary Gensler said the proposal would account for the evolving nature and electronification of trading platforms, though many crypto trading platforms already meet the current “exchange” definition and thus have a duty to comply with the securities laws.