Bittrex, a major cryptocurrency exchange, has chosen to contest the SEC’s complaint against it. This decision has been applauded by a popular pseudonymous legal expert known as “MetaLawMan” on Twitter.
To provide some background, the SEC charged Bittrex and its co-founder and former CEO William Shihara in April 2023 for operating an unregistered national securities exchange, broker, and clearing agency. The SEC also charged Bittrex’s foreign affiliate, Bittrex Global GmbH, for failing to register as a national securities exchange.
The SEC alleges that Bittrex and Shihara coordinated with issuers to delete certain “problematic statements” that could lead to regulatory scrutiny. The SEC’s complaint alleges that Bittrex earned at least $1.3 billion in revenues from transaction fees from investors while operating without registering these activities with the Commission. The SEC’s action against Bittrex is part of its broader efforts to regulate the crypto market and protect investors.
On June 30, 2023, Bittrex and its co-founder and former CEO William Shihara filed a motion to dismiss the SEC’s complaint at the United States District Court for the Western District of Washington. Interestingly, on the same day, Bittrex Global announced zero-fee trading — for a limited period — for transactions involving Bitcoin (BTC), Ethereum (ETH), XRP, Cardano (ADA), and Dogecoin (DOGE) on its USDT markets. This decision is expected to increase the trading volume of these cryptocurrencies on the platform and provide a boost to their liquidity.
According to MetaLawMan, Bittrex’s decision to fight back is a positive development, especially considering the exchange’s decision to wind down its U.S. operations and file for bankruptcy. He noted that Bittrex could have easily agreed to a quick settlement with the SEC, which the regulatory body would have likely portrayed as a victory. However, Bittrex chose to resist.
Bittrex has enlisted the services of two high-profile law firms, Quinn Emanuel and King & Spalding, to aid in their defense. The motion to dismiss the SEC’s complaint put forth by Bittrex argues that crypto assets traded on secondary markets are not securities and that the SEC lacks authority in this area under the Major Questions Doctrine. Additionally, Bittrex contends that the SEC has failed to provide fair notice of its claims, thereby violating Due Process.
MetaLawMan questioned the SEC’s decision to sue Bittrex, especially after the exchange had already exited the U.S. market. He speculated that one of the reasons Bittrex may have decided to leave the U.S. market could be the SEC’s six-year-long investigation into the company. Despite the lengthy investigation, the SEC’s complaint does not allege any fraud or customer harm at Bittrex.
The legal expert also questioned the use of tax dollars in this case and suggested that Congressional oversight might be necessary. He emphasized the importance of this case in the broader context of the SEC’s regulatory overreach and commended Bittrex for standing up to the SEC. This case could potentially set a precedent for other exchanges facing similar challenges from the SEC.