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U.S government rejects Bitrex’s customer-repayment plan

Crypto Exchange Bittrex’s Customer Repayment Plan Faces U S Government

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TL;DR

  • Bankrupt crypto exchange Bittrex faces a legal challenge from the U.S. government over returning customer funds.
  • The government opposes preferential treatment for Bittrex and argues against determining ownership of crypto assets before confirming the bankruptcy plan.
  • Previous government interventions in crypto bankruptcies have influenced outcomes, and Bittrex’s upcoming hearing on June 14 will be crucial.

Bankrupt cryptocurrency exchange Bittrex finds itself entangled in a legal battle as it attempts to return customer funds in cash and cryptocurrency. The United States government, which is owed millions for sanctions violations, filed a court document opposing Bittrex’s proposal. The exchange’s U.S. arm filed for bankruptcy in May after facing allegations of operating an unlawful securities exchange. In addition, Bittrex had reached a settlement of approximately $30 million with the Treasury for facilitating business transactions involving customers from Iran, Cuba, and Crimea.

Bittrex swiftly requested court approval to expedite the reimbursement process, allowing customers to withdraw their holdings without incurring litigation costs and delays. However, the U.S. government, owed $5 million by Bittrex’s Financial Crimes Enforcement Network (FinCEN), argues against granting preferential treatment in the case. The government asserts that categorizing creditors into subordinated classes outside of the confirmation hearing is improper. It claims that Bittrex has not adequately justified determining ownership of cryptocurrency assets before confirming the bankruptcy plan.

The exchange’s lawyers previously revealed that Bittrex’s U.S. arm holds $50 million in customer cash and $250 million in customer crypto. The Maltese operating company, which also filed for bankruptcy, possesses $120 million in customer cash and crypto. These substantial amounts indicate that both entities have sufficient assets to fulfill customer withdrawals. However, the legal challenge from the U.S. government throws a hurdle into Bittrex’s plans to facilitate the return of customer funds.

Previous government interventions set a precedent for crypto bankruptcy plans

The U.S. government’s opposition to Bittrex’s reimbursement proposal echoes previous interventions that have influenced the fate of crypto bankruptcy plans. The proposed acquisition of defunct crypto lender Voyager’s assets by Binance faced significant delays and was eventually abandoned due to concerns raised by the Securities and Exchange Commission (SEC). The SEC expressed worries about certain provisions in the agreement that could have exempted the parties involved from potential breaches of tax or securities laws. As a result, the SEC filed a lawsuit against Binance.

These government interventions have proven to be decisive factors in scuttling crypto bankruptcy plans, highlighting the regulatory challenges faced by the industry. As Bittrex navigates its bankruptcy proceedings and seeks to address the outstanding sanctions issues with U.S. authorities, it will have to contend with the U.S. government’s legal challenge. The upcoming hearing on June 14 will play a crucial role in determining the fate of Bittrex’s proposal and the return of customer funds.

The outcome will not only shape the reimbursement process for Bittrex customers but also set a precedent for future crypto exchanges facing bankruptcy and regulatory challenges.

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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