In a lawsuit filed against cryptocurrency exchange Bittrex on Monday, the U.S. Securities and Exchange Commission (SEC) identified six crypto tokens listed on the platform as securities.
The complaint lists DASH, ALGO, OMG, TKN, NGC, and IHT, alleging that token investors had a “reasonable expectation of profits”, which means the assets should be considered securities under U.S. law.
The SEC claims that Bittrex and its former CEO, William Shihara, who held the position from 2014 to 2019, collaborated with token issuers seeking to list their crypto assets on Bittrex. The watchdog says they worked together to remove “problematic statements” from public channels that Shihara believed could prompt regulatory scrutiny.
The SEC cites DASH investors as an example, who reportedly assumed that the growth and development of the Dash blockchain would increase the token’s value. The Algorand blockchain team reportedly followed a similar approach by promoting the token and promising growth opportunities to holders.
The complaint suggests that the Algorand Foundation linked the potential growth of the Algorand blockchain to the potential demand for the ALGO token itself and its commitment to maintaining a price floor for ALGO.
The SEC also alleges that Bittrex functioned as an “unregistered exchange, broker, and clearing agency” with its international affiliate Bittrex Global GmbH facing charges as well.
Bittrex, which announced the winding down of its U.S. operations on Friday, reportedly received a tip-off in March about the impending SEC lawsuit.
This is not the first instance of the SEC incorporating securities allegations in lawsuits against individuals and firms. In its 2022 lawsuit against former Coinbase employees for alleged insider trading, the SEC identified nine crypto tokens as securities.
Earlier this year, former Coinbase product manager Ishan Wahi and his brother requested a U.S. court to dismiss the case, arguing that the SEC’s definition of securities is incorrect. The SEC is anticipated to file its opposition to the motion this summer.
As of Monday, the SEC had not announced charges against any of the issuers of DASH, ALGO, OMG, TKN, NGC, and IHT.