On Wednesday, the U.S. Securities and Exchange Commission (SEC) filed charges against crypto company Beaxy and its founders and executives.
The SEC charged Beaxy and its executives with failing to register as a national securities exchange, broker, and clearing agency. And the regulator believed such a structure could lead to serious risks for investors.
“To protect investors, there are separate registration requirements for exchanges, brokers, and clearing agencies, with each essentially acting as a check on the other,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “When a crypto intermediary combines all of these functions under one roof—as we allege that Beaxy did—investors are at serious risk. The blurring of functions and the lack of registrations meant that regulations designed to protect investors were not followed...”
The agency also accused Windy Inc and its principals Nicholas Murphy and Randolph Bay Abbot of conducting business through the Beaxy platform without registration.
Another man, Brian Peterson, and his company, Braverock, allegedly provided market making services for BXY as an unregistered dealer.
Without admitting or denying the allegations, Murphy, Abbott, Peterson, and Windy and Braverock operated by them, agreed to injunctions and to to pay civil penalties
Meanwhile, the SEC charged the Beaxy founder, Artak Hamazaspyan, and the company he controlled, Beaxy Digital, Ltd, with raising $8 million by issuing unregistered Beaxy coin (BXY). The regulator also charged the founder with misappropriating at least $900,000 from Hamazaspyan for personal use, including gambling.
Before the allegation, Beaxy issued an announcement suspending its services for one day, stating that "due to the uncertain regulatory environment surrounding our business, we have made the difficult decision to cease operations."
Recently, U.S. regulators have continued to step up their efforts to regulate the crypto industry. This week, the U.S. Commodity Futures Trading Commission (CFTC) filed a civil lawsuit against crypto exchange Binance, alleging multiple violations of CFTC regulations by the exchange and its founder. Meanwhile, CoinBase is also on the SEC's radar.