- The US arm of the exchange Bittrex has filed for Chapter 11 bankruptcy
- The company was recently sued by the SEC and owes $24.28 million to the government already
- Customers should get all their funds back
Crypto exchange Bittrex, which announced the closure of its US wing last month following a lawsuit filed against it by the Securities and Exchange Commission (SEC), has entered Chapter 11 bankruptcy, with the US government among its creditors. Bittrex has assured users with funds still on the platform that their money is safe and there are no suggestions that they will get anything other than a full payout. Bittrex’s biggest creditor is the US government, due to Bittrex owing the Treasury’s Office of Foreign Assets Control (OFAC) a $24.28 million sanctions penalty.
SEC Lawsuit the Catalyst
Bittrex’s troubles began last month when the SEC filed a lawsuit against both Bittrex US and Bittrex Global, alleging that both companies ran an illegal securities exchange, broker-dealer, and clearinghouse in the United States. The SEC claimed that Bittrex listed digital assets that met the definition of securities, which would have required the company to register with the agency and comply with its regulations. Bittrex denies these claims, stating that it did not offer or trade any securities nor did it provide any investment contract products.
However, the pressures, financial and otherwise, of tackling the SEC case weren’t alone. In October last year, Bittrex was accused by OFAC and the Financial Crimes Enforcement Network (FinCEN) of “apparent violations of multiple sanctions programs” among other offences, which resulted in a $24.28 million fine to be paid to OFAC and a further $29 million penalty to be paid to FinCEN, although the latter was transferable.
This has culminated in Bittrex needing to file for bankruptcy, with OFAC now heading the queue for payouts:
The #1 creditor in Bittrex’s Chapter 11 is the OFAC department who they agreed to pay $25m as a settlement for violating Sanctions/AML🌲 https://t.co/UgukJUx5w0 pic.twitter.com/GyMwOhdMiV
— Tree of Alpha (@Tree_of_Alpha) May 8, 2023
Unlike with other exchanges that have gone bankrupt in the last year, there are no suggestions that Bittrex customers won’t get their money back in full, with the bankruptcy action likely being simply a way of protecting the company’s capital, knowing that other charges could soon be coming their way.
