A well-known crypto investment firm, Paradigm, filed an amicus brief in the case of the US Securities and Exchange Commission (SEC) against crypto exchange Bittrex.
In the said brief, Paradigm rejected the unsupported attempt of the regulatory body to expand its authority over the crypto markets.
Legal documents that are submitted to the court of law for providing information or advice relevant to a case by an individual or organization not involved in the case and act as the court’s ‘friend’ are called amicus briefs.
Rodrigo Seira, the special counsel of Paradigm, shared a statement from the company which said that the claims that the SEC has made against Bittrex and other crypto exchanges are completely different from the numerous cases it had filed against token sellers earlier.
It was also highlighted by Paradigm that in the prior cases, the regulatory body had been targeting fundraising schemes in order to regulate them in accordance with the Howey test.
However, in the cases it had filed against crypto exchanges recently, the SEC was trying to expand its authority to include the sales of crypto assets and not just focus on the initial transactions for raising funds.
Therefore, Paradigm argued that the regulatory body was wrongfully trying to regulate the crypto secondary markets through these actions, which involved lawsuits against Kraken and Coinbase.
Based in Seattle, Bittrex had been providing its services to clients in the United States until March when it revealed that it was shutting down its operations because of the current economic and regulatory environment in the country.
In May, the US-based exchange filed for Chapter 11 bankruptcy and revealed that it had over 100,000 creditors and its estimated assets and liabilities were within the range of $500 million to $1 billion.
A month earlier, the SEC had filed a lawsuit against Bittrex in which the regulatory alleged that the crypto exchanged had been in violation of securities laws.
The lawsuit also included the name of the former CEO and co-founder of Bittrex, Bill Shihara. Others included Bittrex Global, the entity based in Liechtenstein, and the Bermuda-based entity.
It is operationally and legally distinct from the entity based in the United States.
Back in May, Paradigm had also filed an amicus brief for supporting crypto exchange Coinbase and criticized Gary Gensler, the chairman of the SEC.
The crypto investment firm highlighted the chair’s own acknowledgment that the regulatory body did not have the authority to regulate the crypto space.
The said statements were made by Gensler back in 2021 and Paradigm highlighted that there has not been any change in the legal landscape pertaining to cryptocurrencies since then.
But, the SEC has recently begun to take actions as if it possesses the authority, which Gensler had previously said it lacked.
Therefore, the regulator is now imposing retroactive penalties on companies that are not in compliance with its authority.
Paradigm also said that some fundraising efforts meet the definition of ‘investment contract’ as per the Howey test, so not all enforcement actions taken by the SEC are correct.