The Securities and Exchange Commission (SEC) has charged the Beaxy cryptocurrency exchange and its executives for failing to register as a national securities exchange, broker, and clearing agency. The charges come after Beaxy raised $8 million through an unregistered offering of its native Beaxy token (BXY). The SEC alleges that Beaxy performed the functions of an exchange, broker, clearing agency, and dealer without registering with the Commission and complying with the rules governing those activities.
Beaxy Executives Accused of Improper Operation
Beaxy and its affiliates are accused of improperly operating by the SEC. The SEC enforcement actions are reaching major exchanges such as Coinbase and Kraken as well as smaller crypto leaders like Tron’s Justin Sun. Windy Inc., the company that ran the Beaxy platform, should have registered as an exchange, clearing agency, and a broker. Windy, Nicholas Murphy, Abbott, Peterson, and their associated firms settled without admitting or denying the allegations of the complaint and agreed to pay fines.
Beaxy Founder Accused of Misappropriating Investor Funds
The SEC accuses Beaxy founder Artak Hamazaspyan of misappropriating some $900,000 of those funds for personal use, including gambling. The SEC complaint filed in the US District Court of Northern District Illinois contains eight counts against various individuals and companies associated with Beaxy.
Penalties Imposed on Beaxy Executives
Beaxy executives agreed to settle with the SEC. Windy Inc., Murphy, Abbott, and Peterson agreed to cease all exchange activities, close down the Beaxy platform, provide accounting records, return customer assets and funds, destroy any BXY in Windy Inc.’s possession, and pay penalties and disgorgements. The SEC is incrementally building a body of legal theories to target crypto asset intermediaries and is not only focused on exchanges.
Gensler Warns Crypto Companies to Comply with the Law
SEC Chair Gary Gensler previously warned crypto companies to comply with the law and adapt their business models accordingly. He added that Congress may need to write new legislation to support the SEC’s oversight of cryptocurrency markets. The SEC has also warned against investing in crypto assets securities citing price volatility and lack of investor protection.
Beaxy Exchange Shut Down
As a result of the charges, the Beaxy exchange has been shut down. Beaxy claimed to have cooperated fully with the SEC but found the regulatory environment too uncertain to continue operating. The ice Miller law firm, representing Beaxy, stated that its clients are pleased to have put this matter behind them and are looking forward to the continuing development of cryptocurrency and blockchain integration into globally regulated markets.
In conclusion, the SEC’s charges against Beaxy and its executives underscore the regulatory challenges facing cryptocurrency firms as they seek to operate within traditional finance frameworks. As digital currencies become more widespread, regulators will likely continue to enforce compliance measures aimed at fostering transparency, accountability, and investor protection.
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