US exchange Bittrex settles with SEC for $24 million fine

Unlike Coinbase and Binance US, which continue to challenge the US regulator SEC, another old US exchange Bittrex chose to pay a fine and settle with the SEC. It had previously announced its withdrawal from the US market.

On August 11, bankrupt cryptocurrency exchange Bittrex and its CEO William Shihara reached a settlement with the U.S. Securities and Exchange Commission (SEC) for a $24 million fine. The SEC stated that Bittrex agreed to pay $14.4 million in ill-gotten gains, $4 million in prejudgment interest, and a $5.6 million civil penalty.

Earlier, the U.S. SEC filed a lawsuit against Seattle-based cryptocurrency exchange Bittrex and its former CEO William Shihara in April, accusing Bittrex of operating a national securities exchange, broker and clearing agency without registration. The SEC said that Bittrex illegally earned at least $1.3 billion between 2017 and 2022. Similar to the lawsuits filed against Coinbase and Binance, the SEC also claimed that some assets offered by Bittrex were unregistered securities.

“For years, Bittrex worked with token issuers to ‘scrub’ online statements indicating they were investment contracts, all in an effort to evade U.S. federal securities laws,” said Gurbir S. Grewal, SEC Enforcement Director, in a statement. “Today’s settlement makes clear that liability cannot be evaded by simply changing labels or altering descriptions, as it is the real-world economic uses of these products that matter. I thank the SEC staff for aggressively pursuing violations in the cryptocurrency industry and bringing additional relief to harmed investors.”

According to court documents, Bittrex will neither admit nor deny the allegations, nor make any public statements that could suggest the SEC’s allegations are without factual basis. Bittrex must pay the SEC within 90 days of its liquidation plan taking effect, though the regulator could seek a court judgment if fees and penalties are not paid by March 1 of next year.

“We are pleased to have reached a settlement with the SEC so quickly after filing our motion to dismiss. The agreement is now before the court for approval,” Bittrex Global said in a statement. “This is a great outcome,” CEO William Shihara said in a statement. “It is critical that our country strikes a balance between the need to promote innovation, encourage entrepreneurs, and protect consumers, and I hope the settlement proposed today will help advance that process.”

Bittrex was once one of the largest exchanges in the United States, with a dollar-backed market share of nearly 23% as of early 2018, according to The Block. But it has been plagued by regulators and U.S. authorities since 2022.

In 2022, Bittrex agreed to pay $29 million to settle an enforcement case with U.S. authorities over "clear violations" of sanctions against countries including Iran, Cuba and Syria.

In March 2023, Bittrex announced the closure of its US business. In May of this year, Bittrex filed for bankruptcy in Delaware, the United States. Bittrex Global's business will not be affected, and Bittrex will continue to serve customers outside the United States. A court document provided by Chapter 11 Dockets, a bankruptcy tracking agency, shows that Bittrex has more than 100,000 creditors, with estimated assets and liabilities worth between $500 million and $1 billion. In addition, Bittrex stated that it is "economically unfeasible" to continue operating the exchange under the "current US regulatory and economic environment." Bittrex is currently in bankruptcy proceedings.

It is reported that before the settlement, crypto investment company Paradigm came out to defend Bittrex, claiming that the SEC exceeded its jurisdiction. Paradigm wrote in July: "The SEC lacks the authority to regulate secondary markets for crypto assets because they do not involve 'investment contracts' and therefore do not fall within the scope of securities transactions within the agency's purview."