2023-06-16 06:04:21
Bittrex US has been granted permission by the Delaware Bankruptcy Court to fulfill the payment needs of its users. The decision will allow US customers to access their assets stored on Bittrex starting today.
Bittrex’s American customers found themselves in the middle of an interesting legal situation: the crypto exchange filed for bankruptcy, while the regulator SEC came down on it. Compensating customers is typically one of the first goals in bankruptcy proceedings, but with the SEC’s involvement in the ring and the dispute over the legal status of crypto-assets, this has been put in jeopardy. Bittrex US filed for bankruptcy back in May, but the US Department of Justice has resisted allowing the exchange to restore customers’ access to their assets.
The Gordian knot was finally cut by Judge Brendan Shannon in Delaware bankruptcy court, whose ruling allows Bittrex US to facilitate customer withdrawals from the platform. This order allows the exchange to allow customers with undisputed claims to transfer their fiat balances and crypto assets from the Bittrex platform.
The court order authorizes Bittrex US to take any action necessary to enforce the relief granted in the order, but does not resolve any ownership or priority disputes between the exchange and customers and other creditors, including the US government. Additionally, the order has no precedential effect on bankruptcy proceedings involving other cryptocurrency assets or cryptocurrency transactions in the United States.
The order emphasizes that nothing in either the motion or the court order should be construed as deciding whether cryptoassets or transactions involving cryptoassets qualify as securities under the securities laws. This is important because securities laws govern the issuance, sale, and trading of securities in the United States. If cryptocurrency assets were considered securities, they would fall under securities laws, resulting in a significantly different situation for the failed crypto exchange and its customers. So, the court’s order does not decide whether cryptocurrency assets or transactions involving cryptoassets are substantively securities or not, it simply allows Bittrex US to facilitate customer payouts without making a decision on the legal status of the cryptoassets.
In April, the US Securities and Exchange Commission (SEC) charged Bittrex and its former CEO, William Shihara, with failing to register with the regulator as a securities exchange, broker, or clearinghouse. The SEC also charged Bittrex’s foreign subsidiary, Bittrex Global GmbH. According to the indictment, Bittrex operated as an illegal platform that facilitated the buying and selling of crypto assets that were offered and sold as securities.
Between 2017 and 2022, Bittrex generated more than $1.3 billion in commissions from trading on its platform, while acting as a broker, exchange and clearinghouse, according to the SEC, without reporting these activities and complying with applicable laws.
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