Beaxy suspended trading on March 28 “due to the uncertain regulatory environment surrounding its business,” according to the cryptocurrency exchange’s blog. The suspension came a day before the US Securities and Exchange Commission (SEC) announced it was accusing Beaxy and its executives of failing to register as a national stock exchange, stockbroker and clearinghouse.
The SEC also said it was charging Beaxy’s founder, Artak Hamazaspyan, and to Beaxy Digital, a company controlled by him, to raise $8 million through an unregistered offering of the Beaxy (BXY) token and Hamazaspyan’s misappropriation of $900,000 of investor funds for personal uses.
In addition to these charges, the agency accuses market makers operating on the Beaxy platform as unregistered brokers. SEC Chairman Gary Gensler said in a statement:
“We allege that Beaxy and its affiliates performed the functions of an exchange, a broker, a clearing agency and a dealer without registering with the Commission and without adhering to clear and time-tested rules governing these activities.”
The SEC said it is litigating its charges against Hamazaspyan for securities fraud and against Hamazaspyan and Beaxy Digital for the unregistered offering of BXY. According to his LinkedIn profile, Hamazaspyan left Beaxy in September 2019 and is based in Yerevan, Armenia.
SEC is incrementally building a body of legal theories to target crypto asset intermediaries. It’s not only focused exchanges. Beaxy complaint shows SEC is scrutinizing market making arrangements as broker-dealer activity and certain custody arrangements as clearing activity.
—Mike Selig (@MikeSeligEsq) March 29, 2023
The SEC is slowly building a body of legal theory to attack crypto asset brokers. It is not only focused on exchanges. Beaxy’s complaint shows that the SEC is looking at market making agreements as intermediary activity and certain escrow agreements as clearing activity.
The SEC has also alleged that Windy Inc, which operated the exchange after Hamazaspyan’s departure, and exchange co-chairmen Nicholas Murphy and Randolph Bay Abbott committed securities violations. The president of Beauxy, Brian Peterson, and companies associated with it allegedly acted as unregistered intermediaries.
The SEC’s complaint, filed in the Northern District Court of Illinois, in Chicago, contains eight counts against Hamazaspyan, Murphy, Abbott and Peterson, as well as Windy Inc, Beaxy Digital, Braverock Investments, Future Digital Markets, Windy Financial and Future Financial.
The SEC said in its statement that it had obtained consent decrees from Windy Inc, Murphy, Abbott, and Peterson requiring them to cease all exchange activities, shut down the Beaxy platform, provide accounting records, return client assets and funds, and destroy any BXY in the possession of Windy Inc. They also agreed to pay penalties and compensation.
Beaxy referred inquiries to the Ice Miller law firm. Partners Yankun Guo and Timothy Belevetz told Cointelegraph:
“Our clients are delighted to have put this matter behind us and look forward to the continued development of cryptocurrency and blockchain, and their integration into regulated markets globally.”
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.