Bittrex has confirmed filing for Chapter 11 bankruptcy protection is a submission for the Delaware District Court. The provider of crypto exchange services estimates its creditors to exceed 100000. The filing before the court reveals assets ranging from $500 million to $1 billion. Similarly, the submissions estimate the liabilities to range from $500 million to $1 billion.
Bittrex Seeks Chapter 11 Protection
The Monday, May 8 filing to the US Bankruptcy Court in Delaware District indicated that the proceedings featured the Seattle-based Bittrex Inc and two Malta-based Bittrex entities. Additionally, the bankruptcy proceedings scope features Desolation Holdings LLC being an affiliated entity.
The bankruptcy proceedings in Delaware exclude Bittrex Global GmbH, which offers exchange services for international clients. The Liechtenstein-based entity will still provide exchange services for global clients. The chief executive of Bittrex Global, Oliver Linch, revealed that the bankruptcy proceedings are drawing the line to US operations given its autonomous status.
Linch assured the customers that their funds would remain safe and secure within the global exchange platform. He lauded the Chapter 11 proceedings as they will enable the court to oversee the deposits to the respective customers.
Linch revealed that the bankruptcy proceeding is essential to wind down US operations. The executive added that Chapter 11 offers a detailed legal process that ties the loose ends.
Bankruptcy Filing Coincides with SEC Charges and Exit From US
The decision to file for bankruptcy conspicuously emerges weeks following the US Securities and Exchange Commission (SEC) filing charges against its former chief and co-founder William Shihara, citing violation of security provisions in April.
The watchdog alleges that Bittrex Inc and its global entity violated US federal laws by operating an unregistered securities exchange. The charges rekindled Bittrex’s days in court that started in October 2022 when the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN) charged Bittrex, citing the violation of the Bank Secrecy Act. The October 2022 charges forced Bittrex to incur a $29 million settlement.
The bankruptcy proceedings reveal OFAC as the credit with the largest claim. The exchange submitted that it owed the OFAC office $24.2 million. An undisclosed crypto wallet has a $14.5 million claim. The filing identifies FinCEN as among the top 50 creditors as owed $3.5 million, while SEC has an undetermined claim.
Hundreds of Millions Withdrawn Since Bittrex Announced US Exit
The recent bankruptcy filing creates another twist to the Bittrex as the exchange had earlier indicated in March to exit the US by April 30, alleging continued regulatory uncertainty. It marks a problematic year for Bittrex in 2023 following the layoff of 83 in February, citing the prolonged crypto winter, FTX collapse, and bankruptcy of several crypto firms.
Submissions made on Wednesday before the court revealed that Bittrex US, alongside the Maltese arms, executed $425 million in withdrawals since it declared its intention to exit US operations.
Bittrex attorney Susheel Kirpalani indicated that the assets identified under Bittrex management declined nearly 80% since 2021. In particular, its assets have plummeted from $2.7 billion to $566 million in 2023.
Kirpalani informed the bankruptcy court that the Bermuda entity and Bittrex Global GmbH are autonomous from the US business. The attorney added that the Bittrex users base comprises 1.5 million, with 600000 residing in the US.
Bittrex Has Sufficient Resources to Meet Claims
Kirpalani revealed that Bittrex did not engage in illicit conduct as other firms that have suffered sudden implosion. Instead, Birttrex suffered financially from operating the exchange business rightfully. The attorney revealed that Bittrex neither loaned out nor risked the customer’s deposits.
Kirpalani illustrated that Bittrex’s professional conduct cost the business declining revenues. The challenges began when the regulatory agencies began restricting and inquiring about the trading permit.
Kirpalani revealed that Bittrex has sufficient resources to redistribute the estate to the customers. The submission shows that the US has $50 million in cash and another $250 million in the client’s crypto.
The Maltese entity has $120 million held in cash and crypto, though, with liabilities matched with assets. The submission by the Kirpalani firm Quinn Emanuel Urquhart & Sullivan demonstrated the existence of $3 million in own cash and crypto.
With Bittrex filing for bankruptcy, the crypto exchange joins other crypto-related firms seeking Chapter 11 protection, including BlockFi, Voyager Digital, and FTX. It is noteworthy to watch the subsequent development of Bittrex bankruptcy proceedings given the increased activity evident in the Voyager Digital and BlockFi process.