The cryptocurrency industry has been hit by another bankruptcy, as Bittrex files for Chapter 11 protection, following in the footsteps of FTX. This news comes amid an ongoing legal battle with a powerful regulator, casting a shadow over the crypto sphere again.
Despite the recent turmoil in traditional banking, with the collapse of three regional banks, the cryptocurrency sector is not immune to financial instability. Bittrex, a major crypto exchange, has filed for bankruptcy in the U.S. Bankruptcy Court in Wilmington, Delaware. The filing only covers the U.S. affiliate, and Bittrex Global, which caters to customers outside the US, will continue to operate as usual.
With over 100,000 creditors and estimated assets between $500 million to $1 billion, Bittrex’s bankruptcy announcement doesn’t come as a shock. The U.S. subsidiary had previously warned it would cease operations in the country by the end of April, citing the “current U.S. regulatory and economic environment.” This decision led to a significant reduction in U.S.-based jobs.
However, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Bittrex, accusing the platform of operating a national securities exchange, broker, and clearing agency violating federal statutes. The SEC they have also targeted Bill Shihara, the former CEO of Bittrex and Bittrex Global. The lawsuit alleges that certain tokens are securities and that Bittrex should have registered with the SEC and applied specific transparency rules before offering these cryptocurrencies.
Bittrex Global CEO Oliver Linchsaid has stated that the company will fight the charges in court, arguing that the SEC failed to provide clear guidance on which digital assets they deemed as securities. Bittrex had requested its U.S. customers to withdraw their funds by April 30, when operations ceased in the country. The bankruptcy court will now decide on the distribution of the company’s assets, with customers expected to be paid in full, according to court papers.
The crypto industry has seen a wave of bankruptcies in less than a year, with platforms such as Celsius Network, Voyager Digital, Three Arrows Capital, and BlockFi all going bust in 2022. It remains to be seen if more companies will join them in the crypto graveyard. Investors and entrepreneurs should stay informed about the ongoing regulatory challenges faced by the cryptocurrency industry and weigh potential risks when considering investments in the sector.