Bittrex, a platform for trading cryptocurrencies, filed for bankruptcy on May 8, making it the second largest exchange to fail after FTX. The company is currently in a legal battle with a powerful regulator.
The crypto industry is once again facing a wave of bankruptcies, which has taken many by surprise. The industry, powered by blockchain technology, had managed to weather the storm until recently, thanks to the failures of traditional financial institutions such as Silicon Valley Bank, Signature Bank, and First Republic Bank. However, a recent event has reminded the industry that it is not immune to financial difficulties, as evidenced by FTX’s recent problems.
This time, it’s Bittrex, a popular cryptocurrency exchange that has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court in Wilmington, Del. The filing only applies to Bittrex’s U.S. affiliate, which is based in Seattle, Washington. Meanwhile, Bittrex Global, which serves customers outside the U.S., will continue to operate as usual.
SEC Lawsuit
Bittrex, a popular cryptocurrency exchange, has recently filed for Chapter 11 bankruptcy in the US Bankruptcy Court in Wilmington, Delaware. Bittrex estimates it has more than 100,000 creditors, with assets estimated between $500 million to $1 billion, according to a court filing.
The announcement doesn’t come as a surprise, as Bittrex had already announced in March that it would cease its operations in the US at the end of April, citing the “current US regulatory and economic environment” as the reason. Before that, the company had cut most of its jobs in the US.
However, despite the wind-down in the US, the US Securities and Exchange Commission (SEC) filed a lawsuit against Bittrex last month, accusing the platform of operating a national securities exchange, broker and clearing agency in violation of federal statutes. Bittrex’s former CEO, Bill Shihara, and Bittrex Global were also sued by the SEC.
The SEC alleges that tokens such as OmiseGo (OMG), Algorand (ALGO), Dash (DASH), TokenCard (TKN), i-House Token (IHT), and Naga (NGC) are securities. In other words, Bittrex should have registered with the SEC and applied specific transparency rules before offering these cryptocurrencies.
The SEC Enforcement Director, Gurbir Grewal, said that the lawsuit against Bittrex “should send a message to other non-compliant crypto market intermediaries.” Grewal also argued that Bittrex’s business model was based on circumventing the registration requirements of the federal securities laws, counseling issuers of crypto asset securities to do the same, and combining multiple market intermediary functions under one roof to maximize profits.
The bankruptcy filing and the SEC lawsuit against Bittrex demonstrate the challenges and risks involved in investing in cryptocurrencies like Bitcoin. It’s crucial for investors to carefully evaluate the risks and consider working with reputable exchanges that follow regulatory guidelines.
