Cryptocurrency exchange Bittrex could face legal action from the SEC, despite being in the process of shutting down local operations due to regulatory difficulties. A further blow to the platform, which is on the verge of leaving US soil.

Bittrex in the crosshairs of the SEC, the US financial regulator

Bittrex is a crypto-currency exchange platform based in Seattle, Washington, USA. Founded in 2013 by Bill Shihara and two other partners, it is now one of the most popular crypto-currency exchanges in the world. It allows users to buy, sell and trade crypto-currencies such as Bitcoin, Ethereum and Litecoin, among others.

According to a recent Wall Street Journal report, the SEC's enforcement division is likely to recommend that the agency sue Bittrex for alleged investor protection violations. In March, the SEC's enforcement unit notified Bittrex of the potential action. In a letter, the SEC said Bittrex had violated laws by acting as an exchange, broker and clearinghouse without registering with the regulator.

However, Bittrex's general counsel said the company's inability to comply with SEC rules was due to a lack of regulatory clarity in the crypto-currency space. The SEC has not yet decided whether it will pursue Bittrex despite its decision to close its US operations. Bittrex was discussing with the SEC in late 2022 how to register its operations.

Rules too financially restrictive for Bittrex

Over time and with the SEC's input, the company realised that there was no opportunity to follow the SEC's rules without essentially shutting down all of its revenue-generating activities in the US. Bittrex's general counsel pointed out that the SEC's lack of regulatory clarity resulted in substantial costs and no certainty as to what can and cannot be offered.

Bittrex announced its intention to close all its US operations on 31 March, citing the difficult regulatory and economic environment. Prior to leaving the US, Bittrex had already paid more than $29 million in fines to the US Treasury Department for sanctions violations in the Crimea region, Cuba, Iran, Sudan and Syria between 2014 and 2017.

In addition, Bittrex does not know whether the SEC will take legal action now that the company is withdrawing from the US. If the agency decides to take action, Bittrex plans to challenge its decision in court unless regulators make a reasonable settlement offer. Once again, we see new attacks by the SEC on exchange platforms, as was the case with the Beaxy platform recently.