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Bittrex had already started winding down operations by the time it received a notice of potential action from the SEC, the general counsel said.

The United States-based cryptocurrency exchange Bittrex is reportedly facing potential action from the U.S. securities regulator despite preparing to shut down local operations.

The enforcement division of the U.S. Securities and Exchange Commission (SEC) is inclined to recommend the agency sue Bittrex over alleged violations related to investor protection, The Wall Street Journal reported on April 16.

The enforcement unit informed Bittrex about potential action from the SEC in March, Bittrex’s general counsel David Maria reportedly said. By that time, the Seattle-based crypto firm had already started the process of winding down its U.S. operations, the attorney stated.

In the notice of potential enforcement action — known as a Wells notice — the SEC wrote that Bittrex had violated laws by doing business as an exchange, broker-dealer and clearinghouse without registering with the regulator.

According to Bittrex’s general counsel, the company discussed with the SEC in late 2022 how to register its operations. The crypto firm found that there was no opportunity to follow the rules of the SEC without essentially ceasing all of its revenue-producing activities in the country.

Attorney Maria stressed that Bittrex’s inability to comply with the SEC rules was due to the agency not providing clear regulations for crypto in the first place. He stated:

“The lack of regulatory clarity here results in substantial costs and no certainty as to what can and can’t be offered.”

Bittrex is not aware whether the SEC is going to file a lawsuit now that the company is terminating operations in the United States, Maria said. If the agency decides to take action, Bittrex will litigate unless regulators “came with a reasonable settlement offer,” the counsel reportedly added.

Related: Rep. Davidson to introduce legislation to fire SEC boss Gensler for crypto overreach

The news came soon after Bittrex announced plans to stop all operations in the United States on March 31, citing the challenging regulatory and economic environment. The exchange advised U.S. customers to withdraw their funds by April 30, 2023.

Before it decided to leave the United States, Bittrex had faced some issues at home. In 2022, Bittrex agreed to pay more than $29 million in fines from the U.S. Department of the Treasury’s Office of Foreign Assets Control and Financial Crimes Enforcement Network. The settlement was related to sanctions violations in the Crimea region, Cuba, Iran, Sudan and Syria between 2014 and 2017.

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