Bittrex Inc filed for Chapter 11 bankruptcy protection, nearly four weeks after regulators accused it of operating an unregistered stock exchange and shutting down its U.S. operations.
The Seattle-based cryptocurrency exchange said the bankruptcy filing would not affect its Global brand Bittrex Global, which is based in Liechtenstein and serves non-U.S. customers.
The filing shows that the exchange's assets and liabilities are between $500 million and $1 billion. No reason was specified for the bankruptcy filing, and it is unclear how the move will affect Bittrex's creditors.
Bittrex said its U.S. users' assets are safe and secure, and the exchange plans to require a limited reopening of their accounts to distribute the remaining balance back to their holders. The exchange had earlier urged its U.S. clients to withdraw funds by April 30. The request for a limited reopening will allow the allocation of assets to customers who fail to meet the deadline.
Bittrex reportedly has 600,000 active users in the United States and another 600,000 unfunded customer accounts. According to a bankruptcy filing, 16 U.S. customers still had at least $1 million in their accounts, with the largest depositor holding $14.6 million in assets.
Bittrex and its former CEO, William Shihara, have been sued by the U.S. Securities and Exchange Commission (SEC) for alleged violations of federal securities laws. The violations include operating as an unregistered exchange, broker and clearing house.
According to the SEC complaint, Bittrex and its former CEO not only failed to comply with regulations in multiple areas, but also helped crypto issuers remove specific statements from their public channels that could have been deemed problematic. This includes price forecasts and statements that imply "profit expectations."
The SEC complaint alleges that Bittrex has been willfully non-compliant since at least 2014, facilitating the buying and selling of crypto assets that are considered securities. The exchange generated more than $1.3 billion in revenue, mostly from trading fees collected between 2017 and 2022, while serving U.S. investors, but did not register any such activity with financial regulators.
The lawsuit specifically names omise go (OMG), algorand (ALGO), dash (DASH), tokencard (TKN), i-house token (IHT), and naga (NGC) as securities.
Bittrex started operations nine years ago and is ranked among the top 25 centralized exchanges in terms of market volume. The trading platform is available in more than 50 countries and processes an average of $23 million in trading volume per day. Bittrex was founded in 2014 by cybersecurity engineers Bill Shihara, Richie Lai and Rami Kawach.
The Seattle-based cryptocurrency company revealed last month that it plans to end its U.S. operations and voluntarily liquidate due to the uncertain regulatory environment surrounding its business.
