The US Securities and Exchange Commission (SEC) sued Chicago-based crypto trading firm Beaxy and its founder Artak Hamazapyan for failing to register as a legitimate exchange or broker. The move is the latest in a series of crypto-related actions US agencies took to protect investors.
In a March 29 statement, the SEC also charged Hamazapyan and Beaxy Digital Ltd., a company he controls, with illegally raising $8 million from an unregistered Beaxy token (BXY) offering. Additionally, the financial regulator accused Hamazapyan of using $900,000 of the collected funds for personal use, including gambling.
In 2019, the running Beaxy was taken over by Windy Inc. after the founder embezzled money, the SEC said. However, Windy’s executives Randolph Bay Abbott and Nicholas Murphy maintained Beaxy’s normal crypto operations. They continued to provide and sell crypto-assets as securities.
However, authorities accused Windy of violating securities laws through the Beaxy platform. Executives did not register the firm as a broker, clearing agency, dealer, or exchange.
The SEC stated:
“The complaint alleges that Windy, through the Beaxy Platform, violated the Securities Exchange Act of 1934.”
Beaxy Suspended Its Crypto Services
According to the agency, Windy signed a deal with Brian Peterson and his entities — Braverock Investments LLC, Future Financial LLC, Windy Financial LLC, and Future Digital Markets Inc. This deal was made in 2019 to provide “market-making services for BXY.” Thus, the SEC considered Peterson and the companies to be unregistered securities dealers.
As a result, Windy, Peterson, Abbott, and Murphy agreed to suspend the operations of the unregistered firm. On March 28, the exchange posted that it was halting its services because of the “uncertain regulatory environment.”
The SEC’s enforcement chief, Gurbir Grewal, stated:
“When a crypto intermediary combines all of these functions under one roof – as we allege that Beaxy did – investors are at serious risk.” He added, “The blurring of functions and the lack of registrations meant that regulations designed to protect investors were not followed or even recognized by Beaxy.”
The SEC’s announcement does not quote that exchange closed its doors under an agreement in federal court with Windy and the individuals affiliated with that platform. Additionally, the deal includes returning all funds to clients and “destroying” Beaxy tokens that are under Windy’s control.
The government is currently taking legal action against Beaxy Digital and Hamazaspyan over the unlisted securities offering. The SEC said the crypto firm’s customers could pull their assets within 24 hours after all users’ orders are canceled, and balances are verified.
Also, the SEC has shown a keen interest in regulating the booming crypto industry in recent years. The agency argues that cryptocurrencies and crypto exchanges should be legalized and subject to securities laws.