Crypto Exchange Bittrex Faces Potential Enforcement Action From The SEC

US crypto exchange Bittrex, which plans to shut down its operations in the United States, is on the SEC’s target. The US regulator is considering plans to sue the exchange for violating investor protection laws, the Wall Street Journal announced on April 16.

David Maria, Bittrex’s general counsel, told the WSJ that they received a Wells Notice from the enforcement unit in March. The document alleged that the crypto firm was operating as a broker-dealer, exchange, and clearinghouse without registering with the agency.

A Wells Notice is a formal letter. It notifies that the SEC is considering legal action against an entity or individual at the conclusion of an investigation.

At the end of 2022, the exchange discussed how to register its activities with the SEC, Maria said. Meanwhile, the crypto firm has determined that it cannot comply with SEC rules without ceasing its income-generating operations in the US. Attorney Maria stressed that Bittrex’s failure to register with regulators was due to the agency’s lack of specific regulations regarding cryptocurrencies.

She declared:

“The lack of regulatory clarity here results in substantial costs and no certainty as to what can and can’t be offered.”

SEC Notice May Not Necessarily Lead Bittrex To Court Action

Maria said they are unsure whether the regulators would take them to court because the exchange is already terminating operations in the United States. However, if the agency takes enforcement actions, the crypto firm will pursue litigation until regulators “come up with an appropriate settlement offer,” she added.

The news comes shortly after Bittrex’s announcement to shut down its services. The exchange said on March 31 that it would be ceasing its activities due to the challenging economic and regulatory situations in the US. Moreover, The crypto firm advised US clients to withdraw their assets by April 30, 2023.

The regulatory agencies have expanded their mandate to crack down on crypto trading since the beginning of 2023. In February, Kraken, the crypto exchange, disclosed it was suspending its staking program in the US. Additionally, the platform disclosed paying a $30 million fine to the SEC to settle an enforcement action alleging it sold unregistered securities.

Meanwhile, Bittrex agreed to pay a $30 million fine in October 2022 to OFAC and FinCEN. It happened because the company allowed about 1,800 users in sanctioned jurisdictions – including Cuba, Crimea, Syria, and Iran – to make transactions worth about $260 million between 2014 and 2017.

According to former SEC attorney John Reed Stark, San Francisco-based crypto exchange, Coinbase is next in line for an SEC lawsuit. Because Coinbase already received the Wells Notice in March this year.

Thanks Mark, I mean that Coinbase is next for an SEC lawsuit, because Coinbase already received a Wells Notice.https://t.co/of3jTSpny2

— John Reed Stark (@JohnReedStark) April 17, 2023