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Another day, another Wells notice.
The SEC has reportedly notified Bittrex of a potential enforcement action alleging that the firm was acting as an exchange, broker-dealer, and clearinghouse without registering with the regulator.
Back in March, SEC’s enforcement division reportedly informed Bittrex about the potential enforcement action—known as a Wells notice. But, this news came after the crypto firm had already started to wind down its operations in the US, David Maria the general counsel of Bittrex told The Wall Street Journal.
On March 31, the exchange announced that it would shut down, citing the “current U.S. regulatory and economic environment. Bittrex did not immediately respond to Decrypt’s request for comment.
Bittrex reportedly explored the option of registering its operations with the SEC late last year but discovered that it wasn't a viable option as they'd have to essentially cease all revenue-producing activities.
“The lack of regulatory clarity here results in substantial costs and no certainty as to what can and can’t be offered,” Maria told The Wall Street Journal.
The SEC requires crypto firms like Bittrex to register with the SEC so the regulatory body can help reduce conflicts of interest and make crypto exchanges look more like traditional stock exchanges.
One of the major pain points here is how cryptocurrencies are defined as securities thus putting them under the scrutiny of the SEC. The regulatory body often won't define a single digital asset as a security but points to the Howey test.
Bittrex is unsure if the SEC will file a lawsuit due to the company winding down its U.S. operations.
That said, Maria stated that his company would take this matter to the courts unless regulators “came with a reasonable settlement offer."
Bittrex in the hot seat
The exchange allegedly failed to monitor suspicious crypto transactions from persons located in Cuba, Iran, Sudan, Syria, and the Crimea region of Ukraine, allowing them to engage in over $263 million from March 2014 to December 2017.
The SEC also fined Bittrex for failing to have a sufficient anti-money laundering program which reportedly led to the exchange having “significant exposure to illicit finance.”