US-Based Crypto Exchange Bittrex Files for Bankruptcy Protection in Federal Court
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Cryptocurrency exchange Bittrex US officially filed for bankruptcy protection on Monday in a Federal Court in Delaware.
The trading platform liabilities are estimated to be between $500m and $1 billion, with more disclosure set to be unveiled in the coming days.
The Collapse of Bittrex US – Chapter 11 Bankruptcy Case in Motion
Bittrex, a globally revered cryptocurrency exchange, appears to be on the pathway to joining the list of liquidated trading platforms after its official filing of Chapter 11 bankruptcy protection on Monday.
The platform asserts that its U.S. entity bankruptcy was triggered based on estimated liabilities and digital assets between $500 million to $1 billion, with over 100,000 creditors’ payments yet to be settled.
Bittrex bankruptcy filings list more than $500 million in both assets and liabilities, and more than 100,000 creditors pic.twitter.com/eBn2Q5yiem
— Randall G. Reese (@Chapter11Cases) May 8, 2023
The ongoing insolvency in the United State Federal Court of Delaware comes weeks after Bittrex got slammed with a lawsuit on April 17th by the Securities and Exchange Commission (SEC) over the operation of unregistered securities, broker, and clearing agency.
Now that Bittrex US has filed for bankruptcy in the US, which retail investors has the SEC "protected"?
It's just going to reduce optionality for US citizens to invest in crypto. Those that really want it will then be forced to use offshore exchanges – the exact companies the…
— Coin Bureau (@coinbureau) May 9, 2023
Following SEC’s litigation, the crypto platform announced it would reduce its operation in the U.S. from April 30th due to the strict and unviable regulatory framework and economic environment.
However, the lawsuit is not just restricted to the Bittrex US entity but also spans to two other entities based in Malta and an associated entity named Desolation Holdings LLC.
Set to cooperate with the SEC towards a smooth resolution, the platform iterated that the current legal action does not impact its other entities spread out across countries like Liechtenstein.
This means that crypto trading operations and transactions will continue as normal for non-U.S. traders and investors.
Due to the unexpected crash of the FTX exchange and the liquidation of crypto-centric investment banks such as Silver Gate and Silicon Valley, the Chapter 11 insolvency case of Bittrex U.S. entity has raised several uncertainties among investors.
The collapse of these major crypto trading and investment platforms resulted in significant debts and economic issues.
This also exposed the weakness of the overall crypto financial markets, which were previously thought to become the next legal tenders.
Aware of the permeating doubts, Bittrex emphasized in its filed bankruptcy that it has over 100,000 creditors and remains committed to ensuring customers’ funds are safe.
Customers in the United States who have yet to withdraw funds or assets from the platform as of April 30th should remain calm, as their digital assets and fiat are safe and secure.
While the bankruptcy case unfolds in the Federal Court of Delaware, crypto enthusiasts, and asset investors remain focused on the methods that will be lawfully integrated to distribute funds back to customers.
Bittrex intends to implore the Delaware court to activate stakeholders’ accounts which have been temporarily closed.
Reopening these accounts will enable customers that meet the lawful regulatory requirements to withdraw funds and assets.
SEC Regulations Will Continue to Change the Entire Crypto Market Structure
The United States Securities and Exchange Commission (SEC) is an independent regulatory body geared to protect investors, maintain transparent and orderly functioning of the securities markets, and create frameworks for capital information.
The regulatory agency was created by the U.S. Congress in 1934 as the first official federal regulatory and security market. It has since scaled to become the most functional financial market agency ever.
Headed by Gary Gensler, SEC is pushing subjects in the crypto market to the full spectrum as it maintains that all platforms trading securities must register with the agency and comply with applicable frameworks to avoid a spate of litigations.
In a recent tweet, Gary Genser iterated that the laws are straightforward. To ensure investor protection, all crypto exchanges, brokers, dealers, and clearing houses must comply and register with the SEC, thereby resolving any potential conflicts of interest.
Intermediaries for investment contracts are required to comply with securities laws & register with @SECGov.
Instead, many crypto platforms are contending that their investment contracts are something else.
The law cares about what something actually is, not what you call it.
— Gary Gensler (@GaryGensler) April 27, 2023
So far this year, crypto exchanges such as Coinbase and Kraken have had sanctions from the SEC for trading unregistered securities.
With Bittrex now in the black books of the SEC, crypto enthusiasts believe the framework is harsh and will probably halt the development of the digital financial markets.