Seattle-based cryptocurrency exchange Bittrex has filed for Chapter 11 bankruptcy, stating that it has more than 100,000 creditors, with liabilities and assets estimated to be $500 million to $1 billion. This development follows recent charges filed by the U.S. Securities and Exchange Commission (SEC) against the company.
SEC accusations and consequences
The SEC accused Bittrex of failing to comply with securities law, specifically for not registering as a broker-dealer, exchange, and clearing agency. The commission’s criminal complaint alleged that the crypto exchange garnered at least $1.3 billion in illicit revenue between 2017 and 2022.
Bittrex’s bankruptcy filing covers its primary Seattle-based entity, Bittrex, Inc., two Maltese Bittrex entities, and an affiliated company, Desolation Holdings LLC. However, the filing does not include Bittrex Global GmbH, the Liechtenstein-based global exchange entity.
In addition to the SEC’s allegations, Bittrex faced charges for Bank Secrecy Act violations from the U.S. Treasury’s Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN) in October. The exchange settled these charges by agreeing to pay approximately $29 million.
OFAC emerged as the largest creditor in Bittrex’s bankruptcy filing, with the exchange listing a $24.2 million claim. A crypto wallet is the next largest creditor, claiming $14.5 million. FinCEN and the SEC are also among the top 50 creditors, with claims of $3.5 million and an undetermined amount, respectively.
Earlier this year, Bittrex announced plans to wind down its U.S. operations. CEO Richie Lai cited the current U.S. regulatory and economic environment for this decision. At the time, the exchange assured U.S. customers that their funds would remain safe.
Crypto industry facing regulatory scrutiny
Bittrex has faced a difficult year in the U.S. The exchange laid off 83 employees in February, blaming the crypto market’s downturn, exacerbated by the collapses and bankruptcies of other cryptocurrency firms. Last year, Bittrex agreed to pay $29 million to settle enforcement cases with U.S. authorities for apparent sanctions violations against Iran, Cuba, and Syria.
Bittrex’s bankruptcy is the most recent example of a cryptocurrency exchange or lending platform filing for Chapter 11 protection, joining the ranks of FTX, BlockFi, Celsius, and Voyager Digital. This trend coincides with increased regulatory pressure on the crypto industry, with the SEC levying fines against numerous American crypto companies for allegedly selling unregistered securities.
SEC Chairman Gary Gensler has stated that most digital assets are securities, except Bitcoin, the largest cryptocurrency by market cap. The regulatory body has rapidly pursued crypto companies after FTX’s collapse in November.