Bittrex Inc., a U.S.-based cryptocurrency exchange, has filed for Chapter 11 bankruptcy protection following accusations from the Securities and Exchange Commission (SEC) of operating an unregistered securities exchange. The filing estimates Bittrex’s assets and liabilities to be worth between $500 million and $1 billion, with over 100,000 creditors.
Despite the bankruptcy filing, Bittrex stated that it is still holding crypto assets belonging to U.S. customers who did not withdraw their funds before April 30. The company assured its customers that the funds are “safe and secure” and that it intends to ask the court to reopen customer accounts to allow them to withdraw their funds.
However, Bittrex’s offshore entities, Bittrex Malta Ltd. and Bittrex Malta Holdings Ltd., have also filed for bankruptcy protection in the U.S. Bittrex Global, the firm’s Liechtenstein-based offshore operations, will continue to operate as normal for its customers outside the U.S.
The SEC took action against Bittrex on April 17, accusing the firm and its executives of promoting and selling unregistered securities. Bittrex denied the allegations, stating that the assets it offered were not securities. The lack of official classification of cryptocurrency assets as securities by the U.S. Congress has led to extrajudicial enforcement actions by the SEC.
Bittrex’s bankruptcy filing highlights the challenges facing cryptocurrency exchanges in navigating regulatory frameworks. The move also raises concerns about the safety of cryptocurrency assets held by exchanges and the need for customers to withdraw their funds in a timely manner.
