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Despite publicly crying “regulatory uncertainty,” Bittrex’s co-founder and employees knew they were breaking securities laws. That’s what the Securities and Exchange Commission alleges in a complaint made against the company Monday, and they have messages they say prove it. 

The complaint cites internal messages detailing the delisting of tokens and removal of marketing statements, “scrubbing” in the company’s parlance, in an effort to cover up that Bittrex helped sell tokens they knew could qualify as security investments under U.S. law. 

The SEC quotes an unnamed employee telling one of Bittrex’s three founders, “I hate people bitching that we don’t email them about market removals.” The SEC says the founder, who also remains unnamed, remarked that his preferred response to those customers was “go f*** yourself” and to tell them to “track your own damn investment or get a broker to do it for you.” 

The Bittrex complaint is the latest in a string of regulatory actions that have used internal communications from the companies themselves to help build cases. Most recently, the Commodity Futures Trading Commission’s suit against Binance was riddled with company emails, Slack messages and even text conversations between Chief Executive Changpeng Zhao and other employees.   

During the 2017 initial coin offering bubble, Bittrex co-founder Bill Shihara allegedly advised different projects to scrub investment-related phrases from their marketing materials after sales were made, according to Monday’s complaint. The move was an effort to make more assets available on the platform and to avoid regulatory scrutiny, according to the SEC. 

Bittrex’s problematic statement cleanup

“Congratz on the crowdsale,” write Shihara in an email to the developer team behind the TKN coin in May 2017, which was included in the SEC filing. Shihara then asked them if they had removed “investment related terms” from their documents. 

Bittrex went on to list several tokens it knew might be securities, the complaint alleges, including several projects that the SEC took action against.

Shihara and other Bittrex employees also allegedly combed through whitepapers, marketing materials and social media posts and urged issuers to remove “problematic statements.” They even had a “cheat sheet” to use as a guide when reviewing materials. 

At the root of the SEC’s complaint is that the alleged failure to follow securities laws hurt investors because Bittrex did not follow established rules and laws governing exchanges. The agency also alleges that Bittrex is still operating in the U.S. now, with plans to formally wrap operations at the end of April. 

‘No obligation’

According to Bittrex’s terms of service, as quoted in the SEC complaint, the company has “no obligation” to separate customer fiat deposits or digital assets and that Bittrex could send whatever fiat currency it wanted to if or when a customer requested to withdraw from their account. That echoes FTX’s alleged similar lack of segregation of customer deposits from other pools of funds. 

SEC Chair Gary Gensler has cited the trouble customers have in collecting their money from bankrupt digital asset firms as an ongoing concern for the agency. 

In October Bittrex agreed to pay $53 million in fines to two separate enforcement entities within the U.S. Treasury Department charged with combating money laundering and enforcing sanctions laws. 

Bittrex said last month that it would stop operating in the U.S., citing the regulatory environment as the main reason.  According to analysis by The Block, the firm’s market share of U.S. dollar crypto trading, a metric that largely captures U.S. market share, fell from approximately 23% of total volume in 2018 to under 1% in 2021. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

EToro’s popularity on Apple’s App Store got a brief boost last week after announcing a partnership with Twitter, but like the rush of a tweet gone almost viral, the jolt was short-lived. 

Last week, the company announced a “$Cashtags” partnership with Twitter that enables the social network’s users to see real-time prices for a wide range of stocks, crypto and other assets, as well as offering the option to invest through eToro. 

After the April 13 announcement, eToro went from being the 404th most popular app in the finance category on the App Store in the U.S. to 221st. At either level, that’s still the least popular among crypto apps tracked by The Block Research. The app has since fallen back to around 327th place. 

In its defense, eToro said it’s not a crypto app.

“We are a multi-asset broker that offers crypto but also stocks, ETFs etc across more than 100 countries,” a spokesperson said in an email to The Block, clarifying what it is. 

The most popular crypto apps

Cash App is the most popular crypto app in the finance category on the App Store in the U.S. as tracked by The Block Research, followed by Coinbase and Binance. 

The competition for crypto customers is high as the amounts being traded on exchanges has dropped since peaking at $4.25 trillion in 2021. Last month, that figure didn’t crack $1 billion, according to data tracked by The Block Research. 

Coinbase, the only publicly-traded exchange, reported fourth quarter revenue of $605 million in 2022, compared to nearly $2.5 billion a year earlier. Shares of the company have tumbled by about half over the past 12 months. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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