Bittrex is one of the largest cryptocurrency exchanges that was founded in 2014 in order to trade Bitcoin (BTC), dogecoin (DGC), etc. It was founded by 3 cybersecurity engineers and immediately caught the attention of investors through its services.
Bittrex is claimed to be the safest securities exchange according to experts but the SEC thinks otherwise. Bittrex has been charged by the SEC for operating an unregistered Exchange, Broker, and Clearing Agency on April 17, 2023.
SEC claims that Bittrex earned $1.3 billion dollars from 2017 to 2022 by selling and buying crypto assets, and transaction fees from US investors while serving them as a broker and exchange without registering any of these activities with the commission.
The US regulatory board further claims that Bittrex and the company’s CEO, William Shihara, advised the investors to refrain from using problematic statements such as price prediction[s],” “expectation of profit,” and other “investment-related terms” on the Bittrex Exchange platform in order to avoid the scrutiny of the SEC.
Since Bittrex failed to register as an Exchange, broker, and Clearing agent, they are under a lawsuit of misconduct by the SEC.
Bittrex, however, thinks otherwise. They have submitted a motion of dismissal as they believe that the United States Securities and Exchange Commission (SEC) does not have the authority to regulate cryptocurrencies as Securities unless permitted by Congress.
According to reports, Bittrex argued that the securities that were traded in the secondary market are not considered as security but are considered commodities and hence the SEC’s lawsuit does not satisfy. Bittrex adopted the same strategy as Coinbase and has capitalized on its legal framework by creating a unified front against the SEC.
This challenges the SEC’s complaint in the lawsuit and also its regulations.
Bittrex has admitted that there were crypto assets that were traded as Securities but they also claim that the securities in the secondary market do not apply to this lawsuit. Bittrex also claims that SEC failed to communicate this regulation clearly to them, challenging the SEC’s complaint in the lawsuit even further.
According to the SEC’s lawsuit in April, Bittrex was well aware of the rules and took extreme measures to evade them. They also claim that the problem might lie with Regulatory compliance rather than regulatory clarity.
SEC claims that Bittrex should have registered as an exchange because they bought and sold crypto assets, using a shared order book which has the orders of all the buyers and sellers using established, non-discretionary methods. These methods are then agreed to, by the buyer and seller, when getting into a contract with Bittrex.
Furthermore, the SEC claims that Bittrex should have registered as a clearing agency because it acted as a middleman in handling payments and deliveries when matching the sell and buy orders, and it kept customer assets safe. Finally, the complaint says that Bittrex should have registered as a broker because it regularly conducted transactions for other people’s accounts involving crypto assets that were treated as securities.
Bittrex filed for bankruptcy in May, following the lawsuit of the SEC. The US government wasn’t too happy with this decision but the court Judge, Brendan Shannon, authorized Bittrex to permit its customers to withdraw their crypto assets that Bittrex was currently holding. On May 8, millions of dollars were withdrawn and on May 10, they had $300 worth of customer Cash.
Usually, bankruptcy filed proceedings normally have a freeze on the company’s assets but Bittrex suggested that the customers should be able to access their money without any restriction of any long drawn-out legal battles.
Disclaimer: This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
