The Florida state financial watchdog brought charges against Bittrex Inc. before the exchange filed for bankruptcy protection in May, a new filing has revealed.
The Florida Office of Financial Regulation (OFR) recently revealed that it issued a complaint to Bittrex on April 17, the same day the U.S. Securities and Exchange Commission (SEC) charged the exchange with operating an unregistered securities trading platform. Bittrex would surrender its Florida license two weeks later and, on May 8, filed for bankruptcy protection.
Bittrex Inc. operated in the U.S. and was based in Seattle, with Bittrex Global overseeing operations outside the United States.
OFR accused Bittrex of failing to segregate customer funds, failing to always maintain a surety bond in the correct amount, and a third charge which was redacted from the public court filings.
In the July 5 filing in the U.S. Bankruptcy Court for the District of Delaware, OFR Assistant General Counsel Brandon Greenberg said it can still charge Bittrex.
“It [is] within our administrative discretion in deciding which legal violations to charge and not charge in our Administrative Complaint,” Greenberg argues.
According to the OFR, Bittrex “expressed [its] disappointment that the OFR had taken an enforcement action against Bittrex Inc. instead of allowing the company to simply surrender the license and leave Florida.”
The exchange also argued that it should be pardoned as all its violations were in the past, and since acquiring the Florida license, it had been compliant.
The regulator was open to working with the exchange on remedies and was ready to explore possible avenues for settlement. However, days later, Bittrex surrendered its license and filed for bankruptcy protection a week later.
As CoinGeek reported, the SEC accuses Bittrex of offering unregistered securities. The regulator alleges that founder William Shihara is on record telling fellow executives that they should list an unregistered security and “roll the dice on the SEC investigation.” Shihara has reportedly made over $130 million from the exchange.
Bittrex becomes one of the several digital asset firms held accountable for violating U.S. laws. Others, like FTX and Celsius Network, have collapsed partly due to their failure to comply with customer asset segregation laws.
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