Bittrex’s attempt to return customer funds has been met with a significant hurdle from the United States, raising concerns over the proposed resolution for the crypto exchange’s bankruptcy case.
The company filed for Chapter 11 bankruptcy in Delaware in May, less than a month after the US Securities and Exchange Commission (SEC) accused it of operating a stock exchange not registered. Two other divisions – Bittrex Malta Ltd. and Bittrex Malta Holdings Ltd. — also filed for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware.
The company’s crypto arm is accused of violating federal laws, including the Bank Secrecy Act, and doing business with foreign nationals in sanctioned countries.
U.S. Government Grounds for Objection
The US government’s objection to Bittrex’s proposal to compensate the customer is another blow and is seen as a coordinated attempt to maim the industry without actually protecting investors.
In fact, the state was known to crush crypto bankruptcy proposals. Following government intervention, Binance.US pulled out of bankrupt crypto lender Voyager Digital’s billion-dollar deal to buy its assets, citing an “uncertain regulatory climate”.
The tribunal deposit by the government on Wednesday said,
“Debtors have not demonstrated why issues of ownership of cryptocurrency assets need to be determined prior to plan confirmation. Finally, segregating creditors into subordinate classes outside of the confirmation hearing is inappropriate. For these reasons, which are discussed in more detail below, the Motion should be dismissed.”
Detailing the reason for the objection, the government filing said:
- The critical vendor standard does not support the requested repair;
- It is premature;
- It improperly attempts to subordinate creditors outside of a plan
Bitter End from Bittrex in the USA
Bittrex was once one of the largest exchanges in the United States. Before descending into bankruptcy, the exchange revealed its intention to leave the country, blaming the hostile regulatory environment.
The company has assets and liabilities each estimated at between $500 million and $1 billion, according to a previous court filing that also detailed the existence of more than 100,000 creditors.
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