The Securities and Exchange Commission (SEC) has charged Beaxy.com, a cryptocurrency trading platform, and its executives for not registering as a national securities exchange, broker, and clearing agency.
Additionally, the founder of Beaxy.com, Artak Hamazaspyan, and a company he controlled, Beaxy Digital, Ltd., were charged with raising $8 million in an unregistered offering of the Beaxy token (BXY), and Hamazaspyan is alleged to have misappropriated at least $900,000 for personal use, including gambling. The SEC also charged market makers operating on the Beaxy Platform as unregistered dealers.
The SEC’s complaint alleges that Windy Inc., through the Beaxy Platform, violated the Securities Exchange Act of 1934 by bringing together the orders for securities of multiple buyers and sellers using established non-discretionary methods under which such orders interacted, acting as an intermediary in making payments and deliveries upon matching sell and buy orders and maintaining custody of customer assets, and was regularly engaged in the business of effecting transactions for the account of others in crypto assets that were offered and sold as securities.
The SEC’s complaint also alleges that, after Murphy and Abbott convinced Hamazaspyan to resign following the unregistered offering of BXY and the misappropriation of investor assets, the two continued the operation of the Beaxy Platform through Windy, and as such are also liable for operating an unregistered exchange, broker, and clearing agency.
The complaint further alleges that, in December 2019, Windy entered into an agreement with Brian Peterson and his companies to provide market making services for BXY, and in May 2020, one of these companies entered into a similar market making agreement for another crypto asset security. By doing so, the complaint alleges that Peterson and the Braverock Entities acted as unregistered dealers.
SEC Chair Gary Gensler said, “Our securities laws for decades have served to protect investors, make capital formation easier and cheaper, and improve our markets. 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.”
As part of the consents filed in the U.S. District Court for the Northern District of Illinois, Windy, Murphy, Abbott, and Peterson have agreed to cease all activities as an unregistered exchange, clearing agency, broker, and dealer; shut down the Beaxy Platform; provide an accounting of assets and funds for the benefit of customers; transfer all customer assets and funds to each respective customer; and destroy any and all BXY in Windy’s possession.
Windy, Abbott, and Murphy agreed to pay a total of $79,200 in civil penalties; Peterson agreed to pay a civil penalty of $6,600; and the Braverock Entities agreed to jointly and severally pay a penalty of $80,000. In addition, Windy agreed to pay $10,779 in disgorgement plus prejudgment interest, and the Braverock Entities agreed to jointly and severally pay $52,000 in disgorgement plus prejudgment interest. The penalty amounts reflect the cooperation the staff received from the settling parties during the investigation.
Beaxy Exchange has announced the immediate suspension of its services. If any assets were left on the exchange, they are secure and will be made available for withdrawal within 24 hours after all user orders are canceled and balances verified.
Read more:
- SEC Warns Investors To Exercise Caution With Crypto Asset Securities
- Justin Sun Responds To SEC’s Legal Action, Calling It A “Civil Complaint”