US regulator sues Beaxy in extended crypto crackdown, as platform shuts down
NEW YORK, March 29 (Reuters) – The U.S. Securities and Exchange Commission (SEC) charged crypto firm Beaxy.com and several executives with registration errors on Wednesday, expanding regulators’ efforts to rein in the industry.
The SEC accused a Chicago-based firm behind Beaxy and some affiliates of serving in various roles as a stock exchange, broker and clearing agency without registering with the SEC. This structure, which is common throughout the crypto industry, is one that the SEC’s head has criticized for conflicts of interest and risk to investors.
Wednesday’s civil charges came a day after Beaxy said it would immediately suspend services, saying that “due to the uncertain regulatory environment surrounding our business, we have made the difficult decision to cease operations.”
It also accused founder Artak Hamazaspyan of raising $8 million in an unregistered offering of the token BXY and misappropriating at least $900,000 for gambling and other personal use.
Hamazaspyan did not immediately respond to a request for comment through LinkedIn.
“This case serves as yet another reminder to crypto intermediaries that their business models must comply and adapt to the law, not the other way around,” SEC Chairman Gary Gensler said in a statement.
The charges filed in Chicago federal court extend a crackdown by US prosecutors and regulators on alleged abuses in the digital assets industry.
On Monday, the Commodity Futures Trading Commission sued Binance, accusing the world’s largest crypto exchange of violating rules that prevent illegal activity.
The next day, New York prosecutors added a Chinese bribery charge to their fraud case against Sam Bankman-Fried, who founded the now bankrupt crypto exchange FTX.
Coinbase Global Inc ( COIN.O ) is also in the SEC’s sights, saying on March 22 that the regulator had found potential violations of securities laws and could sue.
Wednesday’s SEC action included charges against Windy Inc and its principals Nicholas Murphy and Randolph Bay Abbott for operating through Beaxy’s platform without being registered.
Another man, Brian Peterson, was accused of acting as an unregistered dealer by offering marketing services to Beaxy.
Windy, Murphy, Abbott and Peterson settled without admitting wrongdoing and agreed to fines.
“Given this filing, and the fact that the SEC has reportedly issued a Wells Notice to Coinbase, it is likely that this is a harbinger of further actions with respect to exchanges and similar entities,” said Howard Fischer, a former SEC attorney and a partner in the law firm of Moses & Singer.
Reporting by Jonathan Stempel and Chris Prentice; editing by Jonathan Oatis, Josie Kao and Cynthia Osterman
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