Crypto exchange Bittrex files for bankruptcy after SEC complaint

Bittrex Inc, a cryptocurrency exchange, filed for bankruptcy protection on Monday, following allegations by the U.S. Securities and Exchange Commission (SEC) that it was running an unregistered securities exchange. This occurred three weeks after the SEC's accusation against Bittrex.

Bittrex, headquartered in Seattle, announced the cessation of its operations in the US on April 30, but clarified that the filing for bankruptcy protection would not affect Bittrex Global's operations outside of the US. Bittrex Global, located in Liechtenstein, caters to customers outside the US.

Bittrex Inc filed for bankruptcy protection with the Delaware court, citing assets and liabilities between $500 million and $1 billion. This comes three weeks after the SEC accused the Seattle-based cryptocurrency exchange of running an unregistered securities exchange, leading the company to cease operations in the United States on April 30.

Despite the filing, Bittrex Global, which operates outside the United States and is based in Liechtenstein, will remain unaffected. However, Bittrex noted that it still holds cryptocurrency assets belonging to US customers who did not withdraw funds before April 30. The exchange assured that these assets are secure and that it intends to request a limited reopening of customer accounts to return the crypto to its rightful owners.

Over the past year, numerous companies in the cryptocurrency industry have been forced to declare bankruptcy due to a drop in asset prices, renewed regulatory scrutiny, and criminal charges, as was the case with the once-prominent exchange FTX.

On April 17, the SEC sued Bittrex, alleging that former CEO William Shihara had encouraged crypto asset issuers to remove public statements that might prompt regulators to investigate token offerings as securities. Bittrex has denied the allegations, arguing that the crypto assets on its platform were not securities or investment contracts.

Although the SEC's lawsuit is still 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 regulations.

Bittrex filed for bankruptcy protection in Delaware court, revealing that its assets and liabilities were both between $500 million and $1 billion. Nonetheless, the company stated that it was still holding crypto assets belonging to U.S. customers who had not withdrawn funds before April 30, and that these assets were “safe and secure.” Bittrex intends to request a limited reopening of customer accounts so that the crypto assets can be returned to their rightful owners.

The largest unsecured creditor of Bittrex, according to its bankruptcy petition filed in Delaware, is the Treasury Department's Office of Foreign Asset Control, to which the company owes more than $24 million.

Bittrex also named several of its customers as creditors, with 16 of them having at least $1 million in their accounts. The company did not disclose the names of these customers. The petition indicated that Bittrex's biggest remaining customer account has $14.6 million worth of assets.

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