On August 10, the U.S. Securities and Exchange Commission (SEC) announced a significant settlement involving crypto asset trading platform Bittrex Inc. and its former CEO, William Shihara. The settlement requires Bittrex and Shihara to pay a total of $24 million to resolve charges related to the operation of an unregistered national securities exchange, broker, and clearing agency.
Legal Resolution Reached
In a move to address the charges brought against them, Bittrex Inc. and William Shihara have agreed to a comprehensive settlement. The terms of the settlement include a payment of $14.4 million in disgorgement, representing the repayment of ill-gotten gains. Additionally, $4 million in prejudgment interest and $5.6 million in civil penalties are specified in the agreement. These terms are subject to court approval.
SEC’s Legal Action and Allegations
The legal action initiated by the SEC dates back to April, when the regulatory body filed charges against Bittrex Inc. and its co-founder, William Shihara. The allegations centered around the operation of an unregistered national securities exchange, broker, and clearing agency. Notably, the SEC also pursued a separate enforcement action against Bittrex Global GmbH for its role in operating a shared order book in conjunction with Bittrex.
Complexities in Token Listings and Offerings
The SEC’s investigation revealed allegations that William Shihara, the former CEO of Bittrex, collaborated with crypto asset issuers to list their tokens for trading on the platform. Furthermore, it was claimed that Shihara aimed to remove public statements associated with these tokens to preempt regulatory scrutiny that might view the offerings as securities. The SEC emphasized that altering labels or descriptions does not evade liability, as the economic realities of the offerings remain the primary consideration.
Regulatory Perspective and Settlement Implications
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, underscored the significance of the settlement. He highlighted that the settlement underscores the principle that attempts to reframe or relabel offerings are insufficient to evade regulatory responsibility. The SEC’s enforcement action and subsequent settlement signal the importance of adhering to securities laws in the evolving landscape of cryptocurrency trading and offerings.
As the cryptocurrency market continues to evolve and attract increased regulatory attention, such settlements serve as reminders of the necessity for compliance with securities regulations to ensure the protection of investors and maintain the integrity of the financial system.
