Bittrex Ceases Operations in the United States
In a significant development on October 30, the US Bankruptcy Court allowed major cryptocurrency exchange Bittrex to close its operations in the United States and liquidate its assets to settle with creditors. This decision comes in the aftermath of a lawsuit and a subsequent settlement with the Securities and Exchange Commission (SEC).
Background of the SEC Lawsuit
Bittrex’s decision to withdraw from the US came in light of the country’s ambiguous cryptocurrency regulations which rendered its operations unfeasible. However, shortly after this announcement, the SEC issued a Wells notice followed by a lawsuit against Bittrex, accusing the company and its co-founder, William Shihara, of violating securities laws. The lawsuit also identified six tokens listed on the Seattle-based platform as securities.
Chapter 11 Bankruptcy Filing
Reacting to the SEC’s allegations, Bittrex filed for Chapter 11 bankruptcy, urging customers to withdraw their funds. The filing revealed assets and liabilities each valued between $500 million to $1 billion with over 10,000 creditors. Concurrently, Bittrex Malta and Bittrex Malta Holdings sought US bankruptcy protection.
Settlement and Court Approval
In August, Bittrex reached a settlement with the SEC, agreeing to pay $24 million towards disgorgement, prejudgment interest, and civil penalties without admitting or refuting the allegations. Following this settlement, Judge Brendan Shannon of the US Bankruptcy Court for the District of Delaware approved Bittrex’s revised Chapter 11 bankruptcy plan, facilitating the closure of its US operations.
International Affiliate Not Affected
Despite the US setback, Bittrex’s international arm, Bittrex Global, based in Liechtenstein, remains unaffected and continues to cater to customers in other jurisdictions. The SEC’s action against Bittrex faced industry backlash, as highlighted in an Amicus brief filed by Paradigm, arguing against the American watchdog’s authority over secondary markets for cryptocurrencies.