Bankrupt crypto exchange Bittrex and its CEO settled with the Securities and Exchange Commission for $24 million, after the agency charged it in April for operating as an unregistered exchange.
The exchange, its foreign affiliate and former CEO William Shihara did not admit or deny allegations, according to a court document filed on Thursday. Bittrex's foreign affiliate, Bittrex Global GmbH, agreed to settle charges that it failed to register as a national securities exchange, the SEC said in a statement.
“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,” Gurbir S. Grewal, director of the SEC’s enforcement division, said in a statement.
“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 continued.
Shihara called the settlement "a good outcome," in an emailed statement.
"It’s vital that our country strikes a balance between fostering innovation, encouraging entrepreneurs and the need to protect consumers, and I hope today’s proposed settlement helps move that forward," Shihara said.
Bittrex filed for Chapter 11 bankruptcy protection in May, when it said it had assets and liabilities each estimated to be worth between $500 million and $1 billion.
Crackdown on exchanges
Bittrex had said earlier in March that it was pulling out of the U.S.
The company had been one of the largest exchanges in the U.S., with a market share of USD support of nearly 23% at the start of 2018, according to data from The Block.
The SEC has cracked down on crypto exchanges and said that they need to be registered with the regulator. The agency brought charges against Coinbase in June for operating as an unregistered exchange.
SEC Chair Gary Gensler has warned about noncompliance in the crypto industry.
“The platforms themselves, where trading is occurring of various crypto tokens, though some of it comes under the securities laws, currently they’re not necessarily compliant with those time-tested protections against fraud and manipulation," Gensler said last month in a Bloomberg interview.
(Updates to add details throughout and add comments from Shihara)
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