Bittrex and its former CEO William Shihara agreed with the SEC to settle allegations of operating an unregistered securities exchange, broker, and clearing agency for $24 million.
An agreement with the regulator was also reached with the international platform Bittrex Global.
SEC filed a lawsuit against the American exchange, its former CEO, and the overseas affiliate in April. The Commission alleged that it provided American investors with services related to cryptocurrencies that were securities.
According to the agency, in order to make digital assets available for trading, Shihara removed certain “problematic elements” from their descriptions to avoid claims. He led the exchange from 2014 to 2019.
“For many years, Bittrex worked with token issuers to “cleanse” their online representations of any signs that they were investment contracts — and all of this in an attempt to evade federal securities laws. They failed,” said Gurbir Grewal, Director of Enforcement at the SEC.
In his words, it is not enough to “just change the labels”; the economic realities matter.
According to the press release, as part of the settlement the defendants did not admit or deny guilt. They agreed to disgorge ill-gotten gains of $14.4 million, pay $4 million in interest, and pay a $5 million civil penalty.
The agreement is subject to court approval.
In May, Bittrex filed for bankruptcy. The exchange said its assets and liabilities ranged from $500 million to $1 billion. The number of creditors exceeded 100,000.
Bittrex proposed plan to settle claims from customers and creditors ran into objections from authorities. One reason was an outstanding debt to FinCEN of $5 million. This was part of the roughly $30 million that the company agreed to pay in October 2022 as part of a settlement of charges for violating the United States sanctions regime.
In July, Bittrex sought in court to challenge the SEC’s authority to regulate cryptocurrencies.