- Bittrex has initiated bankruptcy proceedings.
- The source of the cryptocurrency exchange’s funding for the legal fees was recently revealed.
- Bittrex plans to receive funding in two tranches.
After a challenging year Lay off more than 80 employees In February, the US arm of Bittrex filed for bankruptcy in Delaware federal court on Monday, May 8.
Bittrex’s decision to file for bankruptcy came weeks after it was received lawsuit from the U.S. Securities and Exchange Commission alleging that it violated the Investor Protection Act by not registering as a stock exchange, even though The company intends to close its business at the end of April.
While a lot I sympathized with the business after the filing of Chapter 11Some questioned Bittrex’s decision to collect legal fees from the bankruptcy proceedings. Reports reveal that the company plans to cover these legal fees with Bitcoin loans.
Bittrex will receive 700 BTC to fund the legal fees
Bittrex plans to fund its bankruptcy case with Bitcoin loans from parent company Aquila Holdings, as well mentioned by Reuters On Wednesday, May 10th.
The company is expected to receive 700 bitcoins, worth about $19.2 million at the time of writing to cover the initiation of legal proceedings and a hearing in June. Bittrex plans to receive the loan in two tranches of 250 BTC and 450 BTC, respectively.
The court has already granted cryptocurrency exchange permission for the first loan of 250 BTC worth approximately $6.86 million at current rates.
US Bankruptcy Judge Brendan Shannon confirmed that Bitcoin’s low interest rate and volatility protection played a major role in his decision to authorize the loan. Bittrex reportedly plans to repay the loan in bitcoin.
The cryptocurrency exchange has assured customers that deposits are in order and that withdrawals will be prioritized during bankruptcy.
As so many sad reactions left the Bittrex bankruptcy decision, many have questioned the US crypto regulations and their role in the stock market crash.
“An untenable regulatory and economic environment”
Bittrex leaned significantly on the difficult regulatory and economic circumstances of its decision to leave the United States and file for bankruptcy.
“The lack of regulatory clarity in the United States has had a significant negative economic impact on the digital asset industry and has led to overlapping regulatory burdens and higher regulatory costs at the state and federal levels.
As a result, the debtors faced an unsustainable regulatory and economic environment that forced them to embark on a restructuring and orderly wind down of their operations in the United States.” filing.
Court documents show that Bittrex’s No. 1 creditor is the US Treasury’s Office of Foreign Assets Control.
In October 2022, the cryptocurrency exchange entered into a $24.3 million settlement agreement with OFAC for allegedly violating US sanctions against Iran, Sudan, Syria, Cuba and the Russian-occupied Crimea region of Ukraine.
on the flip side
- Bittrex’s global arm was not affected by the bankruptcy.
- It remains to be seen how and when customers can withdraw their deposits on the bankrupt exchange.
Why should you bother
Bittrex’s ability to obtain a loan against its legal fees indicates that customer deposits are unlikely to be touched during the bankruptcy process.
Read this to learn more about the Bittrex case:
The US Congress seems to be making great strides towards reaching a consensus on cryptocurrency, but not all of them agree with this plan: