Bittrex Inc., one of the largest crypto exchanges in the U.S., has filed for Chapter 11 bankruptcy protection for its U.S.-based operations. The move comes after the Securities and Exchange Commission (SEC) accused it of operating an unregistered securities exchange. The filing estimates Bittrex’s assets and liabilities each to be worth between $500 million and $1 billion, with over 100,000 creditors.
The filing stated that Bittrex is still holding the crypto assets of U.S. customers who did not withdraw funds before April 30. The company said the funds are “safe and secure,” adding that it intended to ask the court to reopen customer accounts to allow them to withdraw. Bittrex Global, the Liechtenstein-based offshore operations of the company, are not affected by the bankruptcy filing. However, two other entities, Bittrex Malta Ltd. and Bittrex Malta Holdings Ltd., also filed for bankruptcy protection in the U.S.
SEC’s Accusation Against Bittrex
The SEC accused Bittrex of promoting and selling unregistered securities. The firm denied the allegations, claiming that the assets it offered were not securities. The U.S. Congress has yet to classify crypto assets as securities officially, so this is another case of the SEC taking the law into its own hands with extrajudicial enforcement actions.
Bittrex’s bankruptcy filing comes after the closure of its U.S. exchange in late March amid federal regulators’ intensifying war on crypto. In October, Bittrex was fined $53 million for violating anti-money laundering (AML) laws. The company, established in 2014, currently has a daily volume of around $7 million and offers 799 trading pairs, according to CoinGecko.
A Bittrex spokesperson clarified that the bankruptcy filing does not affect Bittrex Global, which will continue operations as normal for its customers outside the U.S. For those customers who did not withdraw their funds from the platform prior to the end of April, their funds remain safe and secure, and the company’s main priority is to ensure that its customers are made whole.
The news of Bittrex’s bankruptcy filing has caused crypto markets to retreat further. The total capitalization has dropped 1.8% to $1.18 trillion. The crypto industry has been under increased scrutiny and regulation in recent months, with regulators concerned about the potential risks associated with the unregulated nature of the industry.