Bittrex’s plan to settle obligations faces objections from US authorities

Representatives of the US authorities challenged the proposal by Bittrex to allow customer withdrawals before the restructuring plan is approved by the bankruptcy court.

On May 8, the exchange filed for bankruptcy. According to the complaint, the company’s assets and liabilities amount to between $500 million and $1 billion. The number of creditors exceeds 100,000.

This preceded a series of events. In April, Bittrex announced the winding down of operations in the United States, citing regulatory uncertainty. Subsequently, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against the company for violations of the law.

Following the bankruptcy filing, Bittrex asked the court to allow customers to withdraw funds without costs and expenses related to the restructuring.

According to lawyers, the U.S. subsidiary has $50 million in fiat currency and $250 million in digital assets. The Malta subsidiary, also mentioned in the filing, has funds totaling $120 million. The funds available to both entities are enough to fully satisfy creditor claims, the lawyers said.

The authorities put forward several objections to the exchange’s proposal for restitution. Bittrex has not yet settled a debt to FinCEN of $5 million. This is part of about $30 million that the company agreed to pay in October 2022 as part of a settlement of allegations in violation of the U.S. sanctions regime.

Government attorneys also pointed to improper categorization of creditors in Bittrex’s proposal. They emphasised that such decisions are the court’s prerogative when approving the restructuring plan.

Earlier in 2020, Bittrex tried to lure users away from Binance amid Binance’s troubles with Roskomnadzor. In June 2023, the SEC filed a lawsuit against the largest cryptocurrency exchange, and subsequently made claims against Coinbase.