SEC Reaches $24 Million Settlement in Case Against Bittrex and Former CEO

The United States Securities and Exchange Commission (SEC) has disclosed a resolution involving cryptocurrency trading platform Bittrex and its former CEO, William Shihara. The settlement pertains to allegations of the operation of an unregistered exchange, marking a significant development in the ongoing regulatory landscape of the crypto industry.

According to the announcement made on August 10th, the SEC unveiled that both Bittrex and Bittrex Global had agreed to a comprehensive settlement, involving a payment structure that includes $14.4 million for disgorgement (restitution of unlawfully acquired gains), $4 million for prejudgment interest, and $5.6 million in civil penalties. It is important to note that the finalization of this agreement is contingent upon court approval.

The SEC’s Enforcement Director, Gurbir Grewal, conveyed the agency’s perspective on the matter, stating, “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.” Grewal emphasized that the settlement sends a clear message that the true substance of offerings is what matters, irrespective of any superficial alterations in labels or descriptions.

In response to the settlement, William Shihara expressed his view that the resolution struck a balance between encouraging innovation, supporting entrepreneurship, and safeguarding consumers. Shihara, who led Bittrex as CEO from its inception in 2014 until his departure in 2019, characterized the outcome as positive.

The SEC’s legal complaint, filed in April, alleged that Bittrex and Shihara were involved in the operation of an unregistered national securities exchange, along with functioning as a broker and clearing agency. Notably, a separate enforcement action was taken against Bittrex Global concerning the operation of a single shared order book along with Bittrex.

This settlement arrives in the wake of previous regulatory actions taken against Bittrex. In October 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control and the Financial Crimes Enforcement Network initiated enforcement proceedings against Bittrex, culminating in a $29 million settlement agreement. Subsequently, in March, Bittrex declared its intention to cease operations in the United States due to regulatory considerations, leading to its filing for Chapter 11 bankruptcy in May.

As of August 10th, the SEC continues to pursue legal actions against prominent cryptocurrency entities such as Binance, Coinbase, Ripple Labs, and Terraform Labs. The regulatory approach of the SEC, often characterized as “regulation by enforcement,” has garnered criticism from various quarters including U.S. lawmakers and industry leaders.

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