The U.S. Securities and Exchange Commission on Monday issued an order directing cryptocurrency exchange BTCMAX and applicant Chester Lu to provide additional briefing on whether the Commission has the legal authority to hear their dispute.
The Commission is asking two questions: whether BTCMAX qualifies as a self-regulatory organization under the Securities Exchange Act of 1934, and whether the actions it allegedly took against Lu fall within the categories the SEC can review under Section 19(d) of the Act.
The SEC said its authority to review SRO actions is “limited in scope” and that it must dismiss any filing that falls outside it.
Lu’s allegations
Lu filed his application on September 18, 2025, alleging that BTCMAX froze $1.07 million in cryptocurrency assets and extracted $235,000 in purported penalties through deception.
According to Lu’s filing, he was recruited into a WhatsApp crypto investment group called “Wealth Multiplication Plan” that provided trading signals he followed. BTCMAX subsequently accused him of manipulating the cryptocurrency market in violation of SEC rules and demanded penalty payments to settle the alleged case.
Lu claims BTCMAX “manipulated the SEC name to create a fake case” to pressure him into paying. He states the SEC’s Division of Enforcement’s Office of Distributions later told him the exchange’s claims about a case against him were “incorrect and part of a fraudulent attempt.”
Lu’s final $25,000 payment was wired to a bank account in Indonesia provided by BTCMAX, according to his filing. After his bank confirmed the funds were credited to the beneficiary, BTCMAX allegedly denied receiving the money for two months before blocking Lu’s account access entirely.
Lu has reported the matter to the FBI.
Under the Exchange Act, an SRO is defined as a national securities exchange, a registered securities association, or a registered clearing agency. Lu must explain which of these definitions applies to BTCMAX.
The Commission set the following deadlines: Lu must file his brief by April 6, BTCMAX must respond by April 20, and Lu may reply by May 4.
If Lu fails to establish that BTCMAX meets the SRO threshold, the SEC warned the application may be dismissed without further notice.
