Bittrex, a well-known cryptocurrency exchange, has filed for Chapter 11 bankruptcy in the United States. This move comes as the exchange was preparing for a legal battle with the United States Securities and Exchange Commission (SEC) after receiving a Wells notice from the agency.
We'd like to provide some context regarding Bittrex US’s decision to file for Chapter 11.
— Bittrex Global (@BittrexGlobal) May 9, 2023
The Wells notice was issued to Bittrex by the SEC, stating that the exchange had engaged in business activities as an exchange, broker-dealer, and clearinghouse without registering. The SEC listed tokens such as OMG, DASH, and ALGO in its complaint, stating that these were securities.
Bittrex had stated that it was ready to sue if the SEC takes enforcement action. However, the bankruptcy filing will have serious implications for the exchange and its users.
“For those customers who did not withdraw their funds from the platform prior to the end of April, your funds remain safe and secure, and our main priority is to ensure that our customers are made whole. While the Bankruptcy Court will ultimately decide the method by which those funds can be claimed by and distributed to our customers, we intend to ask the court to activate those accounts as soon as possible so that customers meeting the necessary regulatory requirements…”
What Does Chapter 11 Bankruptcy Mean for Bittrex?
Chapter 11 bankruptcy is a form of bankruptcy protection that allows a company to reorganize and restructure its debts while continuing to operate. Large corporations commonly use this type of bankruptcy to stay in business while they work to pay off their debts.
In the case of Bittrex, the bankruptcy filing will only affect the operations of Bittrex U.S. The exchange’s global operations will continue to operate as usual.
The Growing List of Insolvent Crypto Exchanges
Bittrex is the latest addition to the growing list of cryptocurrency exchanges that have filed for bankruptcy or gone insolvent in recent years. FTX collapsed in 2019 and was one of the most notable of these exchanges.
Many of these exchanges have also faced scrutiny from regulators such as the SEC, which has been cracking down on unregistered securities offerings in the cryptocurrency space.