Crypto Exchange Beaxy Founder Charged with Gambling Investor Funds

Posted on: March 31, 2023, 04:22h. 

Last updated on: April 4, 2023, 03:13h.

Philip Conneller @casinoorgphilc Read More

Expertise: Gaming Business, Regulation, Tribal Gaming.

Crypto exchange Beaxy suspended its operations Wednesday, citing “an uncertain regulatory environment.” That’s after the US Securities and Exchange Commission (SEC) filed civil charges against founder Artak Hamazaspyan for securities fraud.

He allegedly raised $8 million in an unregistered offering of the token BXY and misappropriated at least $900,000 of the funds. He used this money for gambling and other personal expenses, according to the SEC filing.

Beaxy and several executives were also charged with serving as an exchange, broker, and clearing agency without registering with the SEC.

“When a crypto intermediary combines all of these functions under one roof – as we allege that Beaxy did – investors are at serious risk,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement in a statement. “The blurring of functions and the lack of registrations meant that regulations designed to protect investors were not followed or even recognized by Beaxy.”

Hamazaspyan has not responded to requests for comment via LinkedIn and has since deleted his LinkedIn account.

SEC civil charges do not preclude criminal charges by federal law enforcement agencies. They are often a precursor to criminal action.

Crackdown on Crypto

Those charges, filed in a Chicago federal court, come amid a regulatory clampdown on the crypto industry. On Monday, the Commodity Futures Trading Commission (CFTC) sued Binance, the world’s biggest crypto exchange, which it accused of operating an “illegal” exchange and a “sham” compliance program.

As of Wednesday, blockchain data tracker Nansen said this caused investors to withdraw $1.6 billion in crypto from Binance.

The next day, prosecutors in New York charged disgraced CEO and founder of defunct crypto exchange FTX, Sam Bankman-Fried, with foreign bribery over a $40m payment to Chinese authorities. That allegedly freed up $1 billion in crypto that Beijing had frozen.

The new charge has been added to Bankman-Fried’s rap sheet, which includes wire fraud, commodities fraud, securities fraud, and money laundering.

Protect Investors

SEC Chair Gary Gensler has frequently criticized cryptocurrency firms. He accused them of blending several financial services that he believes should be handled by separate companies, as was the case with Beaxy and is common in the industry.

Our securities laws for decades have served to protect investors, make capital formation easier and cheaper, and improve our markets,” Gensler said about the Beaxy charges.

“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,” he added.