SEC brings charges against Beaxy crypto exchange and its executives

SEC has charged the Beaxy crypto-trading platform and its executives with unregistered activity as a securities exchange, broker, and clearing agency.

Today we charged the crypto asset trading platform https://t.co/ykFkM2s0wY and its executives for failing to register as a national securities exchange, broker, and clearing agency, and we charged market makers operating on the Beaxy Platform as unregistered dealers.

— U.S. Securities and Exchange Commission (@SECGov) March 29, 2023

In the complaint, the regulator also alleged that founder Artak Amazaspian and the controlled Beaxy Digital raised $8 million in an unregistered offering of the Beaxy token (BXY).

According to the complaint, Amazaspian illegally siphoned off at least $900,000, which he spent on personal purposes, including gambling. The Commission also charged the entrepreneur with securities fraud.

In a separate court proceeding, the SEC settled the charges against Beaxy’s market makers.

“Since October 2019, Nicholas Murphy and Randolph Bay Abbott, through their controlled Windy Inc., have supported and represented Beaxy as an online trading platform offering to buy and sell crypto assets that were marketed as securities,” the statement said.

After the unlawful issuance of BXY and the misappropriation of investors’ funds by Amazaspian, the Windy founders persuaded him to resign and continued to run the exchange through their firm.

In December 2019 they entered into an agreement with Bryan Peterson and his companies — Braverock Investments LLC, Future Digital Markets Inc., Windy Financial LLC, Future Financial LLC — to provide market-making services for BXY and other assets. The regulator contends that in these cases they acted as unregistered dealers.

“Our securities laws for decades have protected investors, facilitated and lowered the cost of capital, and improved markets. This case serves as yet another reminder to crypto intermediaries that their business models must adapt to the norms and comply with them, and not the other way around,” said Gary Gensler, Chair of the SEC.

As part of the settlement, the defendants agreed to certain undertakings, including ceasing operations as an unregistered exchange, clearing agency, and broker-dealers.

While not admitting or denying the charges, Windy, Abbott and Murphy will collectively pay $79,200 in civil penalties and disgorge ill-gotten gains with interest of $10,779.

For Peterson, the fine was $6,600, and for his companies — a total of $80,000 in addition to $52,000 in restitution.

The SEC noted that the amount of the penalties reflects the defendants’ cooperation during the investigation.

As reported in March 2023, the Commission filed a lawsuit against Tron founder Justin Sun and three of his companies for unregistered securities offerings in the form of Tron (TRX) and BitTorrent (BTT) tokens.