Crypto Exchange Bittrex Files for Chapter 11 of Bankruptcy Protection in Delaware

On May 8, the American crypto exchange Bittrex filed for Chapter 11 of Bankruptcy protection. A few months ago, the Bittrex team revealed plans to exit the vibrant US crypto market.

Following the announcement to sunset core operation, the US Securities exchange commission submitted a fresh lawsuit against the crypto firm. In their submission, the SEC accused Bittrex of failing to comply with the US registration requirements.

Bittrex Files for Bankruptcy Protection

Also, the SEC accused the crypto exchange of contravening the crypto brokerage and dealership requirements. They observed that Bittrex provided crypto clearance services that failed to support the existing regulations.

After analyzing the revenue generated by the crypto exchange, the SEC noted that Bittrex accumulated $1.3 billion of assets from 2017 to 2022. They observed that the massive wealth generated by the firm was obtained from crypto wrongdoings.

Afterward, the Coinbase team announced plans to shut down operations due to regulatory pressures and unprecedented macroeconomic conditions. In a previous statement from Bittrex boss Richie Lai revealed that the crypto exchange adopted robust security measures to ensure the customer’s assets were safe and secure.

Later Lai announced a reduction in headcount in the preceding months. Bittrex dismissed 88 staff from March and April due to uncertainty in the crypto market.

Will Bittrex Shut Down US Operations?

Beyond this, last month, the SEC took potential enforcement action against the Bittrex ex-chief executive Bill Shihara and his counterpart Oliver Linch for contravening the regulations. Commenting on the SEC accusation, Linch disclosed that the crypto exchange planned to defend itself in court.

Following the recent US clamp down on crypto assets, the Bittrex team filed for Chapter 11 of Bankruptcy Protection on May 8 ahead of the court hearing. The submission was presented before the jury at a bankruptcy court in Delaware.

In their court report, the Bittrex team outlined over 100 000 creditors with measurable assets amounting to $500 million. The creditors mentioned above also own liabilities totaling $1 billion.

The report stated that the troubled crypto exchange has been operational since 2013. Since then, the crypto exchange has witnessed exponential growth in providing digital assets to diverse customers.

Factors Contributing to Violation of Crypto Regulations

A report from Coingecko revealed that Bittrex trading volume soared to above the $5 million mark in the last 24 hours. In 2022, it was reported that Bittrex violated the SEC laws that exposed the firm to a $29 million court penalty. The SEC argued that the operation of Bittrex in Iran, Cuba, and Syria was against the existing crypto regulations.

In the meantime, after submitting the Bittrex bankruptcy filing, the crypto exchange joined FTX, Voyager, Celsius, and BlockFi in the test to settle the outstanding balances. Based on the report generated by Randall Reese of Chapter 11 of the Bankruptcy unit, the US regulators have been making strategic moves to reign crypto space after the crashing of crucial players in digital asset sector.

Presently the SEC has subjected numerous crypto firms in the US to court penalties and inevitable fines due to violation of security requirements. A review of SEC allegations revealed that the crypto exchanges bought and sold unregistered securities, which was against the law.

However, during a recent presentation, SEC chairman Gary Gensler failed to define digital assets classification clearly. Gensler referred to the Howey test in his remarks to explain the grouping of crypto assets as security or commodity.

Gensler grouped the leading digital assets with significant trading volumes, such as Bitcoin, as security.

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