Crypto exchange Bittrex files for bankruptcy after SEC complaint

According to Reuters, Bittrex Inc, a cryptocurrency exchange based in Seattle, filed for bankruptcy protection, three weeks after being accused by the U.S. Securities and Exchange Commission (SEC) of operating an unregistered securities exchange. While Bittrex ceased operations in the United States on April 30, its non-U.S. operations in Liechtenstein, Bittrex Global, will not be affected by the bankruptcy filing.

According to Bittrex's bankruptcy petition, the company's assets and liabilities are both between $500 million and $1 billion. However, the company claims it still holds the crypto assets of U.S. customers who did not withdraw their funds before April 30, and that these assets are “safe and secure.” Bittrex also intends to ask the bankruptcy court for a limited re-opening of customer accounts to distribute the crypto back to customers.

Bittrex's legal troubles are not new. On April 17, the SEC sued Bittrex, alleging that the former CEO, William Shihara, encouraged crypto asset issuers seeking to make their tokens available on the company's platform to delete public statements that could lead regulators to investigate those token offerings as securities. While Bittrex denies the allegations, it had previously agreed to pay $29 million in fines to the U.S. Treasury Department for “apparent violations” of sanctions on certain countries and anti-money laundering law.

Bittrex's largest unsecured creditor is the Treasury Department's Office of Foreign Asset Control, to which the company owes over $24 million. The company's other major creditors are mostly customers of the crypto exchange. The bankruptcy petition lists 16 customers with at least $1 million in their accounts, without identifying them by name. Bittrex's largest remaining customer account has $14.6 million in assets. The cryptocurrency industry has seen several companies fall into bankruptcy in the past year, due to a drop in asset prices, renewed regulatory scrutiny, and in some cases, criminal charges.