The U.S. Securities and Exchange Commission (SEC) is reportedly planning to sue Bittrex, a major cryptocurrency exchange platform, over alleged violations of investor protection laws. The news comes as Bittrex announced its decision to cease all operations in the United States by the end of April 2023.
According to The Wall Street Journal, the SEC’s enforcement division sent a notice of a potential enforcement action, known as a Wells notice, to Bittrex in March 2023. The notice stated that Bittrex had violated laws by doing business as an exchange, broker-dealer and clearinghouse without registering with the regulator.
Bittrex’s general counsel David Maria said that the company had tried to comply with the SEC’s rules, but found them unclear and impractical for the crypto industry. He said that Bittrex had discussed with the SEC in late 2022 how it could register its operations, but realized that there was no way to do so without essentially shutting down its revenue-producing activities in the country.
“The lack of regulatory clarity here results in substantial costs and no certainty as to what can and can’t be offered,” Maria said.
Maria added that Bittrex was not aware whether the SEC would file a lawsuit now that the company was leaving the United States. He said that if the agency decided to take action, Bittrex would litigate unless regulators “came with a reasonable settlement offer.”
Bittrex is one of the oldest and largest crypto exchange platforms in the world, offering trading services for over 300 digital assets. The company announced on March 31 that it would stop all operations in the United States by April 30, 2023, citing the challenging regulatory and economic environment. The company advised its U.S. customers to withdraw their funds before the deadline.
Bittrex’s exit from the U.S. market follows a series of enforcement actions by the U.S. Department of the Treasury against crypto-related entities. In October 2022, Treasury announced the largest-ever enforcement action of its kind against Bittrex, imposing more than $29 million in fines for sanctions violations in several countries between 2014 and 2017. Treasury also sanctioned two crypto mixing services, Tornado Cash and Blender.io, earlier this year for facilitating money laundering and other illicit activities.
The SEC’s potential lawsuit against Bittrex could signal a more aggressive stance by the regulator towards the crypto industry, which has been seeking more clarity and guidance from the agency. The SEC has been involved in several legal disputes with crypto firms, such as Ripple Labs and Coinbase Global, over the status and regulation of digital assets.