US SEC sues cryptocurrency exchange Bittrex, claiming securitization of 6 stocks


Sued cryptocurrency exchange Bittrex

The U.S. Securities and Exchange Commission (SEC) announced today that it has filed a lawsuit against cryptocurrency exchange Bittrex and its former CEO William Shihara.

The reason for the lawsuit is that it provided securities trading, brokerage and clearing services to US investors without business registration. As examples in the complaint, the SEC describes the securities nature of six securities, including Algorand (ALGO), which was listed on Bittrex.

The SEC also sued Bittrex’s overseas division, Bittrex Global GmbH. He claimed that because he shared one order book with Bittrex, he had to register as a business in the United States as an exchange.

The virtual currencies that the SEC has cited as examples of securities claims this time are as follows.

  • Algorand
  • Dash (DASH)
  • OMG (OMG)
  • Monolith (TKN)
  • Naga (NGC)
  • IHT Real Estate Protocol (IHT)

Although not explained in the press release, in the complaint, the SEC explained the basis for classifying the above stocks as securities. For example, for Algorand, it states that the Algorand Foundation raised funds through a token sale.

The SEC noted that the Algorand project has two organizations, the Algorand Foundation and Algorand Corporation. The two sides have collaborated on Algorand projects and initiatives, claiming that “algorand token buyers are investing in joint ventures.”

He also pointed out that token buyers expect revenue from the efforts of others. The SEC applies the Howey test to classify Algorand as a security.

connection: What is the Howey test that determines whether a virtual currency is a “securities”?

What is SEC

An abbreviation for “Securities and Exchange Commission,” a US government agency that supervises the trading of securities such as stocks and bonds. Its purpose is to ensure fair transactions and protect investors.

▶Cryptocurrency Glossary

Other issues

The SEC also took issue with Bittrex and former CEO Shihara’s efforts to lobby cryptocurrency issuers to avoid regulatory investigations. For example, it asked publishers to remove statements about “earnings expectations,” “investments,” and “price expectations” from their public disclosures.

SEC Chairman Gary Gensler commented in today’s announcement:

Today’s lawsuit once again reveals that the cryptocurrency market is not lacking in regulatory clarity, but in compliance.

Bittrex and the cryptocurrency issuers knew the rules of regulation because they removed information that would make the cryptocurrency judged to be a security.

connection: US SEC Chairman Gensler mentions virtual currency in congressional testimony Answers questions on securities law

Bittrex statement

Bittrex announced earlier this month that it would be closing its U.S. operations on April 30. He cited regulatory uncertainty as the main reason for the termination.

connection: Cryptocurrency exchange Bittrex to close operations in the US

In response to the lawsuit, the company released a statement on the 17th. “We regret Chairman Gensler’s enforcement actions that seem to drive cryptocurrencies out of the United States,” he said.

And it claims that it does not provide securities services. The SEC’s continued enforcement of regulatory actions will affect not only the U.S. cryptocurrency industry, but blockchain technology and innovation in general.

Bittrex also criticized the SEC for failing to give notice of securities law violations for more than five years. In addition, he pointed out that he had asked specifically which stocks were securities, but had not received an answer, and said that he would prove the unfairness of the lawsuit in court.

connection: Virtual currency exchange Bittrex settles with the US Treasury to pay a fine of over 4 billion yen

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