The U.S. Securities and Exchange Commission (SEC) has accused crypto asset trading platform Bittrex, Inc. (Bittrex) and its co-founder and former CEO William Shihara of operating the stock exchange, brokerage and clearing house without regulatory registration approval.

The SEC also alleged that Bittrex's foreign subsidiary, Bittrex Global GmbH, failed to register for stock exchange eligibility when it jointly operated a single shared order book with Bittrex.

Since at least 2014, Bittrex has been positioned as a platform to facilitate the buying and selling of cryptocurrencies, assets that the SEC alleges were offered and sold as securities. From 2017 to 2022, Bittrex earned at least $1.3 billion from investors, including those in the United States, and the company also served clients as a broker, exchange and clearing house, but the company was not registered with the SEC for related activities.

The complaint also alleges that Bittrex and Shihara, who served as the company's CEO from 2014 to 2019, negotiated with issuers who intended to trade their crypto assets on Bittrex's platform to remove from public publicity channels certain "problematic statements" that Shihara considered.

Shihara believes that these statements will trigger an investigation by an agency (such as the SEC) into its offering of crypto assets as securities. For example, in order to avoid regulatory investigation, before Bittrex made assets available on the platform, Bittrex and Shihara instructed the issuer to remove references to "price forecasts," "profit expectations," and other "investment terms."

SEC Chairman Gary Gensler said, "This action shows that what the crypto market lacks is not regulatory transparency, but rather that these firms are not operating in compliance as required." As stated in our complaint, Bittrex and the issuers it worked with knew they needed to play by the rules, but Bittrex went out of its way to circumvent those rules by instructing the issuer to 'delete' certain informational materials indicating that certain crypto assets were securities. In addition, Bittrex allegedly failed to register as an exchange, broker-trading company, and clearing house in compliance with U.S. securities regulations. The apparent correction does not change the fundamental economic properties of its products and the nature of Bittrex's illegal behavior. Today we are holding Bittrex accountable for its violations."

Gurbir S. Grewal, director of the SEC's Division of Enforcement, said: "We allege that Bittrex repeatedly put its own profits ahead of investor protection. As stated in our complaint, Bittrex's business model is based on three actions: circumventing the registration requirements of the federal securities laws; Advising issuers of crypto-asset securities to collude by modifying their offering materials; Combine multiple market intermediation functions in a single platform to maximize profits. "This action is intended not only to hold Bittrex accountable for its misconduct that puts investors at risk, but also to serve as a warning to other crypto market intermediaries operating uncompliant to comply with federal securities regulations and be held accountable for their violations."

In its complaint filed in the U.S. District Court for the Western District of Washington, the SEC said Bittrex and Bittrex Global used a shared order book to bring together securities orders from multiple buyers and sellers, interacted with orders in an established, non-discretionary manner, and entered sellers and buyers of such orders to agree to the terms of the transaction. Therefore, these two companies should be registered as exchanges.

The complaint also alleges that Bittrex acted as a payment and delivery intermediary when matching buy and sell orders, and provided asset protection services to customers, so the company should also register as a clearing house. In addition, the SEC also believes that Bittrex regularly engages in the business of trading crypto assets for the accounts of others, and that these crypto assets are sold and traded as securities, and therefore, the company should also be registered as a broker.