Litigation Release No. 25694 / April 17, 2023
Securities and Exchange Commission v. Bittrex, Inc., Bittrex Global GmBH, and William Hiroaki Shihara, No. 2:23-cv-00580 (W.D. Wash. filed April 17, 2023)
SEC Charges Crypto Asset Trading Platform Bittrex and its Former CEO for Operating an Unregistered Exchange, Broker, and Clearing Agency
Bittrex Global GmbH also charged for failing to register as a national securities exchange
The Securities and Exchange Commission today charged crypto asset trading platform Bittrex, Inc. and its co-founder and former CEO William Shihara for operating an unregistered national securities exchange, broker, and clearing agency. The SEC also charged Bittrex, Inc.’s foreign affiliate, Bittrex Global GmbH, for failing to register as a national securities exchange in connection with its operation of a single shared order book along with Bittrex.
Since at least 2014, Bittrex has held itself out as a platform that facilitated buying and selling of crypto assets that the SEC’s complaint alleges were offered and sold as securities. From 2017 through 2022, Bittrex earned at least $1.3 billion in revenues from, among other things, transaction fees from investors, including U.S. investors, while servicing them as a broker, exchange, and clearing agency without registering any of these activities with the Commission.
The complaint further alleges that Bittrex and Shihara, who was the company’s CEO from 2014 to 2019, coordinated with issuers who sought to have their crypto asset made available for trading on Bittrex’s platform to first delete from public channels certain “problematic statements” that Shihara believed would lead a regulator, such as the SEC, to investigate the crypto asset as the offering of a security. For example, in an effort to avoid regulatory scrutiny, before Bittrex would make an asset available on its platform, Bittrex and Shihara instructed issuer-applicants to delete statements related to “price prediction[s],” “expectation of profit,” and other “investment related terms.”
The SEC’s complaint, filed in the U.S. District Court for the Western District of Washington, alleges that Bittrex and Bittrex Global should have registered as an exchange because they brought together, using a shared order book, the orders for securities of multiple buyers and sellers using established, non-discretionary methods under which such orders interacted, and the buyers and sellers entering such orders agreed to the terms of a trade.
The complaint further alleges that Bittrex should have registered as a clearing agency because it acted as an intermediary in making payments and deliveries upon matching sell and buy orders and maintained custody of customer assets. Finally, the complaint alleges that Bittrex should have registered as a broker because it regularly engaged in the business of effecting transactions for the accounts of others in crypto assets that were offered and sold as securities.
The complaint alleges that Bittrex and Bittrex Global acted as an exchange, and Bittrex acted as a broker and clearing agency, without registering as an exchange, broker, or clearing agency, in violation of Sections 5, 15(a), and 17A(b) of the Securities Exchange Act of 1934 (Exchange Act), and Shihara violated Sections 5, 15(a), and 17A(b) of the Exchange Act as a control person over Bittrex under Section 20(a) of the Exchange Act.
The SEC’s investigation was conducted by Daphna Waxman and Pamela Sawhney of the Division of Enforcement’s Crypto Assets and Cyber Unit and Ainsley Kerr of the Market Abuse Unit. It was supervised by Mark R. Sylvester, Jorge Tenreiro, and David Hirsch of the Crypto Assets and Cyber Unit. The SEC’s litigation is being conducted by Christopher Carney, Ben Kuruvilla, Ms. Waxman, and Ms. Sawhney and supervised by Ladan Stewart and Olivia Choe.