May 23, 2024
Latest Cryptocurrency News

US Government Opposes Bankrupt Crypto Exchange Bittrex’s Customer Fund Return Plan

According to a court filing on Wednesday, the US is challenging a proposal put forth by Bittrex, a bankrupt cryptocurrency exchange, regarding the return of customer funds and crypto. The US government claims that it is still owed millions for violations related to sanctions.

On May 8, the US arm of Bittrex filed for bankruptcy after regulators accused it of operating an unlawful securities exchange. Additionally, the company reached a settlement of approximately $30 million with the Treasury for enabling business transactions with customers from Iran, Cuba, and Crimea.

Just four days later, the company sought court approval to allow customers to withdraw their holdings without the need for costly and time-consuming litigation. However, the US government, which is owed $5 million by the company’s Financial Crimes Enforcement Network (FinCEN), argues against showing favouritism.

The government’s filing stated, “Siloing creditors into subordinated classes outside of the confirmation hearing is improper.” It further noted, “The Bittrex companies have not demonstrated why the issues of ownership of cryptocurrency assets need to be determined before the confirmation of the [bankruptcy] plan.”

Bittrex’s US arm holds $50 million in customer cash and $250 million in customer cryptocurrency. The Maltese operating company, which also filed for bankruptcy, possesses $120 million in customer funds and crypto. Lawyers representing the company have previously assured the Delaware court that both entities have sufficient assets to facilitate customer withdrawals.

Similar interventions by the US government have previously thwarted cryptocurrency bankruptcy plans. An attempt by Binance to acquire the assets of defunct crypto lender Voyager was abandoned due to delays caused by the Securities and Exchange Commission (SEC). The SEC argued that the fine print would have absolved individuals involved from tax or securities law breaches. Subsequently, the SEC filed a lawsuit against Binance.

A hearing regarding Bittrex’s proposal to permit withdrawals is scheduled for June 14.

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