The American cryptocurrency exchange Bittrex could face potential action from the local securities regulator despite preparing to shut down its local operations.
The watchdog division of the US Securities and Exchange Commission (SEC) is inclined to recommend the agency sue Bittrex for alleged investor protection-related violations, according to reported The Wall Street Journal on April 16.
The enforcement unit informed Bittrex about the potential SEC action in March, Bittrex general counsel David Maria reported. At that time, the Seattle-based cryptocurrency firm had already begun the process of shutting down operations in the United States, the attorney stated.
In the notice of possible enforcement action — known as the Wells Notice — the SEC wrote that Bittrex had violated laws by doing business as an exchange, broker-dealer, and clearinghouse without registering with the regulator.
According to Bittrex’s general counsel, the company discussed with the SEC in late 2022 how to register its trades. The crypto firm found that there was no opportunity to follow SEC rules without essentially ceasing all of its income-generating activities in the country.
Attorney Maria stressed that Bittrex’s inability to comply with SEC rules was due to the agency’s failure to provide clear regulations for cryptocurrencies in the first place. He stated:
“The lack of regulatory clarity in this area generates substantial costs and no certainty about what can and cannot be offered.”
Bittrex does not know if the SEC will file a lawsuit now that the company is winding down its US operations, Maria said. If the agency decides to take action, Bittrex will litigate unless regulators “come up with a reasonable settlement offer,” the lawyer added.
The news comes shortly after Bittrex announced plans to halt all its US operations on March 31, citing the difficult regulatory and economic environment. The exchange advised US clients to withdraw their funds by April 30, 2023.
Before deciding to leave the United States, Bittrex had faced some problems in its country. In 2022, Bittrex has agreed to pay more than $29 million in fines from the US Department of Treasury’s Office of Foreign Assets Control and Financial Crimes Enforcement Network. The deal related to sanctions violations in the Crimea region, Cuba, Iran, Sudan and Syria between 2014 and 2017.
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