Cryptocurrency exchange Bittrex Inc has filed for bankruptcy protection, just three weeks after being accused by the U.S. Securities and Exchange Commission (SEC) of operating an unregistered securities exchange. The move has resulted in Bittrex ceasing operations in the United States as of April 30. However, the exchange has stated that its non-U.S. operations in Liechtenstein, under Bittrex Global, will not be affected.
Assets and Liabilities of Bittrex
According to a bankruptcy petition filed in Wilmington, Delaware court, Bittrex’s assets and liabilities were both in the range of $500 million to $1 billion. The company has also clarified that it is still holding crypto assets of U.S. customers who did not withdraw funds before April 30, and intends to request the bankruptcy court for a limited re-opening of customer accounts so that the crypto could be distributed back to the customers.
Bittrex’s Denial of SEC Allegations
Bittrex has denied the allegations made by the SEC, saying that the crypto assets on its platform were not securities or investment contracts. The SEC sued Bittrex on April 17, alleging that the former CEO William Shihara had encouraged crypto asset issuers seeking to make their tokens available on the company’s platform to delete public statements that could lead regulators to investigate those token offerings as securities. While the lawsuit remains pending, Bittrex had previously agreed to pay $29 million in fines to the U.S. Treasury Department for “apparent violations” of sanctions on certain countries and anti-money laundering law.
Bittrex’s Creditor List
Bittrex’s petition listed the Treasury Department’s Office of Foreign Asset Control as the company’s largest unsecured creditor, with more than $24 million owed to the agency. Bittrex’s other largest creditors were mostly customers of the crypto exchange. The exchange listed 16 customers with at least $1 million in their accounts without identifying them by name. Bittrex’s largest remaining customer account has $14.6 million in assets, according to the petition.
Conclusion
The bankruptcy protection filing by Bittrex is not surprising, given the current climate in the crypto industry. Several companies have tumbled into bankruptcy over the past year, felled by a drop in asset prices, renewed regulatory scrutiny, and in some cases, criminal charges. However, the fact that Bittrex is still holding crypto assets of U.S. customers who did not withdraw funds before April 30, and has stated that these assets are “safe and secure,” is a positive sign. The company’s intention to request a limited re-opening of customer accounts to distribute the crypto back to customers is also a good move. It remains to be seen how the bankruptcy proceedings will impact Bittrex and its customers in the long run.
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