Bittrex, a cryptocurrency exchange based in Seattle, has filed for Chapter 11 bankruptcy.
Bittrex made the announcement on Monday, a little over a week after closing its U.S. operation at the end April. The company said that the decision does not affect Bittrex Global which is regulated by Bermuda and Liechtenstein and serves customers outside of the U.S.
In a press release, the company stated that funds of customers that had not been withdrawn by the end April "remain secure and safe."
The company stated that "our main priority is to make sure our customers are fully compensated." The bankruptcy court will decide how the funds will be distributed and claimed by our customers. We intend to ask the court for the accounts to be activated as soon as possible to allow customers who meet the regulatory requirements to withdraw the money.
Chapter 11 bankruptcy is a way for a debtor restructure their obligations in order to pay back creditors. Many companies are able to continue operating while going through Chapter 11 bankruptcy.
Bittrex is also facing charges from the Securities and Exchange Commission. The SEC alleges that Bittrex operated an unregistered exchange. The SEC announced its charges in April and claims that Bittrex assisted in the buying and sale of crypto assets sold as securities. Bittrex also generated revenue in excess of $1.3 billion between 2017 and 2022, without being registered with the SEC. The federal regulator claims that Bittrex, and its former CEO Bill Shihara, tried to avoid public statements which could have led a regulator into investigating Bittrex's cryptocurrency assets as securities.
Bittrex claimed that it asked the SEC which assets were securities and that the SEC had not told the company. In April, a spokesperson said that the SEC charges are part of Chairman (Gary Gensler) Gensler’s crusade against cryptocurrency in the United States. They added that the SEC’s enforcement will have a chilling impact on blockchain, crypto and innovation.
Bittrex announced in February that it would be laying off its 83 employees.
Shihara founded Bittrex with Rami Kawach, a fellow Amazon cybersecurity engineer, and Richie Lai (the current CEO) in 2014. Bittrex allows users to buy and trade cryptocurrencies such as Bitcoin and Ethereum. It also lets them trade using their mobile devices. The company did not comment on the number of employees at Bittrex. However, it lists over 270 employees on LinkedIn.
The crypto industry is facing tough times. In November, FTX, a crypto exchange once valued at over $32 billion dollars, declared bankruptcy. Crypto exchange Crypto.com announced in January that it would be laying off 20% of its employees, following a similar announcement made in July.
Gensler stated in a press release that announced the charges against Bittrex, "Cryptomarkets suffer from a failure of regulatory compliance and not a confusion of regulations." "As alleged by our complaint, Bittrex knew the rules they had to follow but took great measures to avoid them. They directed issuer-applicants that they should'scrub off' any information that indicated that certain crypto assets are securities.