On Monday, Bittrex filed for bankruptcy in the U.S. state of Delaware. This news comes months after the exchange announced its plan to wind down operations in the country and weeks after being sued by the Securities and Exchange Commission (SEC). According to a court filing shared by Randall Reese of Chapter 11 Dockets, a bankruptcy tracker, Bittrex believes it has over 100,000 creditors, with estimated liabilities and assets both within the $500 million to $1 billion range.
Bittrex’s Bankruptcy Filing
Bittrex’s U.S. branch has had a rough year so far, laying off 80 people in February and announcing in March that it would end all operations by the end of April. These changes have not affected Bittrex Global, the non-U.S. crypto exchange. However, despite Bittrex’s impending exit from the U.S., the SEC sued it in mid-April on allegations that it operated a national securities exchange, broker, and clearing agency. The SEC also sued former Bittrex CEO Bill Shihara and Bittrex Global. Bittrex Global CEO Oliver Linch said last month that the exchange intended to fight these charges in court, but a bankruptcy proceeding may make this more difficult.
Bittrex’s Troubled Year in the U.S.
Bittrex is not the only cryptocurrency exchange that has experienced regulatory hurdles in the U.S. In fact, many exchanges and lenders have filed for bankruptcy, including FTX, Celsius, Voyager, and BlockFi. Bittrex’s decision to wind down its operations in the U.S. is not surprising, given the regulatory issues that the cryptocurrency industry has faced in the country.
SEC’s Lawsuit Against Bittrex
The SEC’s lawsuit against Bittrex alleges that it operated as an unregistered national securities exchange, broker, and clearing agency from at least 2014 until at least 2019. The SEC also accused Bittrex of violating anti-money laundering (AML) laws and failing to implement adequate AML procedures. The lawsuit seeks injunctive relief, disgorgement, and civil penalties.
Bittrex’s Intention to Fight SEC’s Charges
Bittrex Global CEO Oliver Linch said last month that the exchange intended to fight the SEC’s charges in court. However, Bittrex’s bankruptcy proceeding may make this more difficult. It remains to be seen how this will affect Bittrex’s ability to fight the charges.
Bittrex’s Bankruptcy Proceeding
In filings made at the Delaware Court, Evan Hengel, the company’s Co-Chief Restructuring Officer of Bittrex, said that customers would get a “100 percent like-kind cryptocurrency distribution” under its liquidation plan, enabling them to access the Bittrex platform and withdraw their crypto. This means that customers will receive cryptocurrencies of similar value to the ones they hold in their Bittrex accounts.
Other Crypto Entities That Filed for Bankruptcy
Bittrex is not alone in its bankruptcy filing, as many other crypto entities have also filed for bankruptcy. FTX, a Hong Kong-based crypto exchange, filed for bankruptcy in March 2021, citing regulatory issues. Celsius, Voyager, and BlockFi, among others, have also filed for bankruptcy, with many citing regulatory hurdles as the reason behind their financial troubles.
Bittrex’s Liquidation Plan
Bittrex’s Co-Chief Restructuring Officer claims that the exchange’s liquidation strategy provides for a “100 percent like-kind cryptocurrency distribution” to clients. Customers will be able to withdraw their crypto from the Bittrex platform in exchange for other cryptocurrencies with a similar market value to the ones they already possess. While this may be good news for customers, it remains to be seen how this will affect Bittrex’s creditors.
The Reason Behind Bittrex’s Bankruptcy
Given the U.S. cryptocurrency industry’s regulatory challenges, Bittrex’s bankruptcy filing wasn’t surprising. The digital asset business has suffered from overlapping regulatory burdens and rising regulatory expenses due to regulatory uncertainty in the country. Bittrex filed for bankruptcy because to an unsustainable regulatory and economic environment, according to its Co-Chief Restructuring Officer.
CEO’s Tweet on Bittrex’s Bankruptcy
Bittrex’s Co-Founder and CEO, Richie Lai, tweeted that the bankruptcy filing was the “cleanest way to bury the baby,” but that Bittrex “still have 100% of all customer funds.” While the tweet may seem flippant, it underscores the challenges that Bittrex has faced in the U.S. market and the impact that regulatory hurdles can have on the cryptocurrency industry.
Impact on the Cryptocurrency Industry
The filing of bankruptcy by Bittrex, coupled with the regulatory challenges that precipitated it, is poised to exert a profound influence on the cryptocurrency sector. The intricate regulatory landscape in the United States has presented a formidable obstacle for cryptocurrency exchanges and lenders, who are grappling to find their footing amidst the dearth of regulatory clarity. Amidst the tempestuous conditions, a few have successfully navigated the turbulent waters. However, Bittrex, unfortunately, has not been among the fortunate ones.