Bittrex Cryptocurrency Exchange Files for Bankruptcy Protection Amid SEC Lawsuit

Bittrex Inc, a cryptocurrency exchange based in Seattle, filed for bankruptcy protection in Delaware court, three weeks after the U.S. Securities and Exchange Commission (SEC) accused it of operating an unregistered securities exchange. Bittrex had ceased operations in the United States on April 30th, but assured customers that its non-U.S. operations in Liechtenstein would not be impacted by the filing. According to the bankruptcy petition, Bittrex's assets and liabilities fell between $500 million and $1 billion.

Bittrex stated that it still holds crypto assets of U.S. customers who did not withdraw funds before April 30th, and it will request a limited re-opening of customer accounts so that the crypto can be distributed back to customers. The company's non-U.S. customers were not affected by the filing.

The crypto industry has seen a number of companies fall into bankruptcy over the past year due to a drop in asset prices, regulatory scrutiny, and, in some cases, criminal charges. Bittrex is not the first exchange to face regulatory challenges, as the SEC sued the company on April 17th, alleging that former CEO William Shihara encouraged crypto asset issuers seeking to make their tokens available on the platform to delete public statements that could lead regulators to investigate those token offerings as securities.

Bittrex denies the SEC's allegations, arguing that the crypto assets on its platform were not securities or investment contracts. However, the company 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 bankruptcy petition revealed that the company owes more than $24 million to the U.S. Treasury Department's Office of Foreign Asset Control, making it the largest unsecured creditor. Bittrex's other largest creditors were mostly customers of the exchange, with 16 customers holding at least $1 million in their accounts, but their identities were not revealed. The company's largest remaining customer account has $14.6 million in assets, according to the petition.