The US Securities and Exchange Commission (SEC) alleged that cryptocurrency trading platform Beaxy and its executives ran an unregistered stock exchange, broker, and clearing agency.
The platform ceased operations a day before the SEC’s lawsuit.
Beaxy Fouder misappropriated nearly $1 million in investment funds
in a Press release on Wednesday (March 29, 2023), the SEC declared that Beaxy operated as an exchange, broker, and clearinghouse without registering all three services.
Beaxy founder Artak Hamazaspyan is also accused of illegally raising $8 million in an unregistered security offering of his native token, BXY. According to the SEC’s complaint, Hamazaspyan embezzled $900,000 of the funds for personal use, which included gambling.
The SEC also filed charges against Nicholas Murphy and Randolph Bay Abbott, who held the Beaxy platform through Windy.
As stated in the press release, Murphy and Abbott took over Beaxy and were operating the platform through Windy after Hamazaspyan stepped down following unregistered token sales and his embezzlement of investor funds. The US regulator alleges that Windy violated securities laws because he ran an unregistered exchange, broker and clearing agency.
According to the director of the agency’s enforcement division, Gurbir Grewal, the alleged lack of distinction between Beaxy’s three functions was risky 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. When a crypto broker combines all of these functions under one roof, as we allege Beaxy did, investors are at serious risk. The confusion of roles and the lack of records meant that regulations designed to protect investors were not followed or even recognized by Beaxy.
Additionally, Brian Peterson and his companies, collectively called the Braverock entities, were also caught up in the SEC charges. Brian and his companies entered into an agreement with Windy to provide market making services for the Beaxy token and also made a similar arrangement for another crypto security, resulting in Peterson and Braverock being unregistered dealers.
Beaxy closes operations
While Murphy, Abbott, Windy, and Peterson neither denied nor accepted the SEC’s allegations, the parties agreed to take certain actions, including closing the Beaxy platform and ceasing operations of an unregistered exchange, an agency clearing and a broker. Windy will also destroy all BXY tiles in his possession.
In particular, Beaxy announced on March 28 in a blog posta day before the SEC’s press release, that it would shut down trading due to the “uncertain regulatory environment surrounding its business.”
Beaxy noted that the exchange cooperated with the SEC for more than two years, but said that the uncertain regulatory landscape made it difficult for the platform to continue operating. Trading has been halted and users are advised to withdraw their assets within 30 days.
Meanwhile, 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.”
The latest development shows the SEC’s continued crackdown on the crypto industry of late. The watchdog previously accused Coinbase, Kraken, Genesis and Gemini of violating securities laws.
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