Bittrex Files for Chapter 11 Bankruptcy Following SEC Action
- Crypto trading platform Bittrex has filed for Chapter 11 Bankruptcy in the United States Bankruptcy Court for the District of Delaware.
- It has more than 100,000 creditors, between $500 million and $1 billion in assets, and between $500 million and $1 billion in liabilities.
- The bankruptcy proceedings cover the company’s Seattle-based entity, Bittrex, Inc., two Bittrex entities in Malta, and an affiliated entity.
- Earlier in April, the SEC filed a lawsuit against the crypto exchange, while OFAC and FinCEN fined it $53 million in October 2022.
A popular crypto trading platform founded in 2014 by three cybersecurity engineers, Bittrex, seems to be in a lot of trouble after a recent action taken by the United States Securities and Exchange Commission (SEC) a few weeks ago. However, the exchange’s troubles are far from over, and it has filed for protection from creditors under Chapter 11 Bankruptcy in the District of Delaware, US. This is the first major crypto-related bankruptcy in quite a few weeks.
As per a filing made on May 8 by Bittrex in the United States Bankruptcy Court for the District of Delaware, the company has approximately more than 100,000 creditors, between $500 million and $1 billion in assets, and between $500 million and $1 billion in liabilities. The crypto trading platform has now initiated bankruptcy proceedings amid a US regulatory crackdown and recently, announced that it would be leaving the US market.
Another important fact to note here is that the bankruptcy proceedings cover the trading platform’s Seattle-based entity, Bittrex, Inc., two Bittrex entities in Malta, and an affiliated entity, Desolation Holdings LLC. However, the Liechtenstein-based global entity for exchanges, Bittrex Global GmbH, was not included in the bankruptcy filing.
On the other hand, this filing follows the company’s decision to end its operations in the United States, citing unclear and unfair regulatory standards as the reason for the decision. This announcement from the company came on its ninth anniversary. As per co-founder and CEO of the firm, Richie Lai, all the funds belonging to Bittrex customers in the US are safe and can be withdrawn at any time.
Earlier in April, the SEC charged the crypto exchange and its co-founder and former CEO, William Shihara, with operating an unregistered national securities exchange, broker, and clearing agency. Furthermore, a separate lawsuit was filed against Bittrex Global “in connection with its operation of a single shared order book” along with the exchange.
The regulator stated that this lawsuit against Bittrex is a message “to other non-compliant crypto market intermediaries to follow the federal securities laws or be held accountable for their violations.”
On the other hand, the exchange claimed in a statement that the SEC’s lawsuit makes no sense while adding:
“For over five years, […] the SEC would not provide notice of the specific conduct that it thought violated the federal securities laws. Specifically, on multiple occasions, we asked them to tell us what digital assets on our platform they viewed as securities, so that we could review and potentially delist them. They refused to do so.”
In October last year, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN) announced that they had fined the exchange around $53 million for the violation of the Bank Secrecy Act’s (BSA’s) anti-money laundering (AML) and suspicious activity report (SAR) reporting requirements.
While the OFAC believes that the platform failed to block residents of people belonging to regions where sanctions were imposed, fined them $29 million, FinCEN imposed a fine of $24 million, claiming that the firm failed to put in place rules to prevent exposure to illicit activities.