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Bittrex files for Chapter 11 bankruptcy amid SEC’s crackdown on crypto exchanges

TL;DR

  • Bittrex has filed for Chapter 11 bankruptcy protection, with estimated liabilities and assets ranging from $500 million to $1 billion.
  • The bankruptcy filing comes on the heels of SEC charges accusing Bittrex of securities law violations and failing to register with the financial watchdog, resulting in at least $1.3 billion in illicit revenue.

Seattle-based cryptocurrency exchange Bittrex, Inc., along with two Malta-based Bittrex entities and an affiliated entity, Desolation Holdings LLC, filed for Chapter 11 bankruptcy on Monday. Bittrex Global GmbH, a Liechtenstein-based global entity, is not included in the filing. The company has over 100,000 creditors, with estimated assets and liabilities in the $500 million to $1 billion range. The filing comes after the SEC accused Bittrex of non-compliance with securities law and failing to register with the financial watchdog.

SEC’s allegations and Bittrex’s struggles

The SEC alleges that Bittrex took at least $1.3 billion in illicit revenue from 2017 to 2022, failing to register as a broker-dealer, exchange, and clearing agency. In April, the SEC charged Bittrex, Inc., and Bittrex Global with operating an unregistered securities exchange. In October, the exchange received charges related to Bank Secrecy Act violations from the OFAC and FinCEN and agreed to pay around $29 million in a settlement. OFAC is the largest creditor in Bittrex’s bankruptcy filing, with a $24.2 million claim, followed by a crypto wallet with a $14.5 million claim. FinCEN and the SEC are also listed among the top 50 creditors.

Bittrex announced it was winding down US operations in March, citing the “current US regulatory and economic environment.” CEO Richie Lai assured US customers their funds would be safe. The exchange also cut 83 employees in February, blaming the crypto market downturn caused by the collapses and bankruptcies of other crypto firms.

The crypto industry faces increased regulatory scrutiny

In 2022, Bittrex agreed to pay $29 million to settle enforcement cases with US authorities for “apparent violations” of sanctions against countries including Iran, Cuba, and Syria.

Bittrex’s bankruptcy follows recent Chapter 11 filings by other crypto exchanges and lending platforms, including FTX, BlockFi, Celsius, and Voyager Digital. The crypto industry faces increased scrutiny from regulators, with the SEC imposing fines on several American crypto companies for allegedly selling unregistered securities.

The regulatory body typically avoids explicitly labeling any particular digital asset as a security, instead relying on the Howey test as a guideline. SEC Chairman Gary Gensler claims most digital assets are securities, except Bitcoin, the largest by market cap. Regulators have intensified their efforts against crypto companies following November’s FTX digital asset exchange collapse.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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