Bittrex, the cryptocurrency exchange, is reported to have filed for bankruptcy protection, three weeks after the US Securities and Exchange Commission (SEC) accused it of operating an unregistered securities exchange.
Bittrex files for bankruptcy
The US based Bittrex ceased operations in the United States on April 30, and it said the bankruptcy filing would not impact Bittrex Global, which serves customers outside the US. The company’s non-US operations are based in Liechtenstein.
The exchange believes it has more than 100,000 creditors with assets and liabilities were both between $500 million and $1 billion, according to the bankruptcy petition filed in Wilmington, Delaware court.
Bittrex said that it was still holding crypto assets of US customers who did not withdraw funds before April 30.
Those assets are “safe and secure” and Bittrex said it intended to ask the bankruptcy court for a limited re-opening of customer accounts so that the crypto could be distributed back to customers.
Several companies in the crypto industry have tumbled into bankruptcy over the past year, felled by a drop in asset prices, renewed regulatory scrutiny, and in the case of the once-prominent exchange FTX, criminal charges.
The SEC sued Bittrex on April 17, alleging that former CEO William Shihara 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.
Bittrex has denied the SEC’s allegations, saying the crypto assets on its platform were not securities or investment contracts.
While the SEC’s lawsuit remains pending, Bittrex had previously agreed to pay $29 million in fines to the US Treasury Department for “apparent violations” of sanctions on certain countries and anti-money laundering law.
Bittrex’s petition listed the Treasury Department’s Office of Foreign Asset Control as the company largest unsecured creditor, with more than $24 million owed to the agency.
Bittrex’s other largest creditors were mostly customers of the crypto exchange. Bittrex listed 16 customers with at least $1 million in their accounts, without identifying them by name.
Evan Hengel, the company’s Co-Chief Restructuring Officer, said that customers would get a “100 percent like-kind cryptocurrency distribution” under its liquidation plan, enabling them to access the Bittrex platform and withdraw their crypto.
The company “faced an untenable regulatory and economic environment” given “the lack of regulatory clarity in the US [which] created a substantial negative economic impact on the digital asset industry and resulted in overlapping regulatory burdens and soaring regulatory costs,” Hengel said.
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