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Digital asset exchange Bittrex has filed a Chapter 11 lawsuit with the US Bankruptcy Court for the District of Delaware, a move that comes just a month after the company announced it would cease its US operations and weeks after the US Securities and Exchange Commission (SEC) charged it with operating an unregistered stock exchange.
According to its bankruptcy petition, Bittrex’s assets and liabilities are between $500 million and $1 billion, which includes the Seattle-based entity Bittrex Inc, two Bittrex entities in Malta, and affiliated entity Desolation Holdings LLC.
Bittrex Global GmbH, the Liechtenstein-based global entity for the exchange, was not included in the filing, and the company stated that its decision to file for bankruptcy in the US would not affect Bittrex Global, which will continue to operate for customers outside of the United States.
The US bankruptcy filing was an escalation from Bittrex on April 4th announcement that it would close its US operations at the end of that month, citing “continued regulatory uncertainty” in the US as the reason.
In a press release this Monday, the exchange assured customers that funds in the US that are not withdrawn by April 30 will remain safe, adding that the bankruptcy court will decide on the procedure for distributing the remaining funds.
Expensive disputes with regulators
The “regulatory uncertainty” that led to Bittrex halting its US operations was compounded by an SEC complaint against the company, filed on April 17, accusing it of operating an unregistered securities exchange.
The complaint alleges that the Bittrex entity has acted as a broker-dealer, exchange, and clearing agent since the company’s 2014 launch while failing to register with the SEC as an entity offering such services.
Since 2014, the SEC claims Bittrex has generated “at least $1.3 billion” in revenue from customers, most of whom are US-based, placing these customers “at significant risk” by “serving them in these unregistered capacities”.
Bittrex has denied the SEC allegations, arguing that the digital assets on its platform are not securities or investment contracts, a popular refrain among those accused of dealing in unregistered securities and an argument Coinbase (NASDAQ:COIN) has tried to make ever since. received Wells’ notice from the SEC last March notifying the company that enforcement can be expected soon.
The SEC’s April complaint against Bittrex was not the first meeting with authorities that may have contributed to the exchange’s bankruptcy filing.
Last October, Bittrex was fined nearly $30 million for “deficiencies related to Bittrex’s sanctions compliance procedures.” Specifically, the company is accused of allowing accounts in countries under US economic sanctions to trade hundreds of millions of dollars worth of digital assets.
This costly payout comes amid a general market downturn caused by the FTX collapse, which lasts into early 2023. Perhaps sensing regulators swirling, Bittrex is trying to leave ship, but apparently not fast enough to avoid its US bankruptcy. entity.
Watch: What is the future for trading and digital assets?
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