Exchange for trading digital assets Beaxy shut down after being accused of running an unregistered securities exchange by the U.S. Securities and Exchange Commission (SEC).
The platform was also charged with failing to register as a broker and a clearing agency, according to the securities regulator’s lawsuit, which was filed on Wednesday in the Northern District of Illinois.
Today we charged the crypto asset trading platform https://t.co/ykFkM2s0wY and its executives for failing to register as a national securities exchange, broker, and clearing agency, and we charged market makers operating on the Beaxy Platform as unregistered dealers.
— U.S. Securities and Exchange Commission (@SECGov) March 29, 2023
It also accused the company’s founder Artak Hamazaspyan of executing an unauthorized offering in which he sold Beaxy tokens for $8 million (BXY). Additionally, it is claimed that Hamazaspyan stole at least $900,000 for personal purposes, including gambling.
Beaxy has announced that it is ceasing operations as a result of the litigation. The exchange announced in a blog post that it will immediately halt all services “because to the unclear regulatory climate around our operation.”
The exchange asserted that after canceling all orders and confirming balances, it will make all monies available for withdrawal within 24 hours.
“We strongly advise you to withdraw any remaining assets within 30 days to avoid unnecessary complications and delays,” the exchange told its users.
The SEC accused the exchange of willfully and repeatedly breaking financial and securities rules, but Beaxy asserted that it has cooperated with the regulator from its founding. In order to “help regulators in any way we could,” it was said to have “offered information, statistics, and interviews.”
Beaxy said, “Unfortunately, despite all of our efforts, it has become apparent that the regulatory situation is simply too unpredictable to continue operations.
The SEC’s account is noticeably different. According to the regulator, creator Hamazaspyan was forced to retire in October 2019 after raising $8 million using unregistered securities, and Nicholas Murphy and Randolph Bay Abbott took over. They ran Beaxy through their business Windy, Inc. until this week’s closure.
The lawsuit also included Brian Peterson, whose businesses Braverock Investments LLC and Future Digital Markets Inc. are accused of providing market-making services to Beaxy. Peterson engaged in unregistered dealer activity by providing these services.
Gary Gensler, chairman of the SEC, said, “We allege that Beaxy and its affiliates exercised the functions of an exchange, broker, clearing agency, and dealer without registering with the Commission and complying with clear, established rules governing those activities.”
“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.”
