The US securities regulator has charged cryptocurrency exchange Bittrex and William Shihara, its Founder and former CEO, for operating as a national securities exchange, broker and clearing agency without registration.

According to US Securities and Exchange Commission (SEC), Bittrex violated registration requirements of the US federal securities law, instructed crypto issuers using its platform to delete certain information that indicated their digital assets were securities, and ran different market intermediary functions under one entity in order to maximize profits.

The regulator also filed charges against Bittrex Global GmbH, a foreign affiliate of the digital asset firm, for joining hands with Bittrex to operate a single shared order book--a central system that allows traders to submit buy and sell orders for a particular asset or security--without registering as a national securities exchange.

The SEC announced the lawsuit on Monday in a statement, noting that it filed its complaint before the US District Court for the Western District of Washington.

Bittrex Made $1.3B from Services: SEC

According to the SEC’s complaint, Bittrex since at least 2014 enabled the buying and selling of cryptocurrencies offered as securities on its platform. The cryptocurrency made about $1.3 billion in revenue between 2017 and 2022 while serving its clients as a broker, exchange and clearing agency.

The cryptocurrency exchange generated the revenue from transaction fees charged on investors, including those from the United States, among other sources of revenue. However, neither of the services run simultaneously by Bittrex were registered, SEC pointed out.

SEC explained that Bittrex and Bittrex Global should have registered as a brokerage because they connected multiple buy and sell securities orders through a central system. On the other hand, the platform should have registered as a broker because it “regularly engaged in the business of effecting transactions for the accounts of others in crypto assets that were offered and sold as securities.”

Furthermore, the financial watchdog noted that Bittrex should have filed for registration as a clearing agency as it facilitated payments and deliveries after matching buy and sell orders. In addition, acting as a custodian of customer digital assets demanded clearing agency registration, the regulator said.