Key Takeaways
- The enforcement division of the SEC is likely to recommend legal action against Bittrex for operating as an exchange, broker-dealer, and clearinghouse without registering with the regulator.
- Bittrex is not sure if SEC will file a lawsuit against the company now that it is terminating its US operations.
Leading US Cryptocurrency exchange, Bittrex, is reportedly facing potential legal action from the US Securities and Exchange Commission (SEC) over alleged investor protection violations. As per a Wall Streets Journal report, the enforcement division of the SEC is said to be inclined to recommend legal action against the exchange for operating as an exchange, broker-dealer, and clearinghouse without registering with the regulator.
Bittrex’s general counsel, David Maria, stated that the exchange was informed of the potential action in March by the SEC’s enforcement unit. However, by that time, the Seattle-based firm had already begun the process of winding down its US operations. The news of the SEC’s potential action comes after Bittrex announced in March that it would cease all operations in the US, citing the challenging regulatory and economic environment.
In a notice of potential enforcement action, known as a Wells notice, the SEC reportedly accused Bittrex of violating laws related to investor protection. Bittrex reportedly discussed with the SEC in late 2022 how to register its operations but found that there was no opportunity to follow the regulator’s rules without ceasing all of its revenue-producing activities in the country.
Bittrex’s general counsel cited the lack of clear regulations for cryptocurrency as a major factor in the company’s inability to comply with SEC rules. Attorney Maria stated that “the lack of regulatory clarity here results in substantial costs and no certainty as to what can and can’t be offered.”
Bittrex is not clear if SEC will file a lawsuit against the company now that it is terminating its US operations. However, Maria said added if the SEC decides to take action, the exchange will litigate unless regulators “came with a reasonable settlement offer.”
This is not the first time Bittrex has come under regulatory scrutiny. Last year in October, the US Department of the Treasury’s Office of Foreign Assets Control(OFAC) and Financial Crimes Enforcement Network took enforcement actions against Bittrex for allegedly violating sanctions programs and reporting requirements under the Bank Secrecy Act, or BSA.
