Former customers of the defunct crypto exchange Bittrex US will be able to claim their funds this week. However, in some cases, customers may expect clawbacks as the bankruptcy continues to play out. Many parties have skin in the game and Bittrex’s decision is not free from controversy.
The US arm of the crypto exchange Bittrex will begin to pay out funds to its customers on Thursday, June 15, in the latest stage of its Chapter 11 bankruptcy. After floating the possibility for weeks, Bittrex finally got the go-ahead from a Delaware bankruptcy court, according to a Finance Magnates report on Wednesday.
Judge Warns of Possible Clawbacks
However, federal officials believe that Bittrex US should pay outstanding penalties and settlements first. Furthermore, Judge Brendan Shannon authorized payments only to customers who do not have any additional legal claims against the platform.
Shannon also acknowledged the possibility of a clawback by authorities due to a lack of clarification over who is the legal owner of the cash and cryptocurrencies frozen in the accounts.
The judge also did not clarify whether the claims of end customers are more important than the claims of the US government. An issue that may come back to haunt proceedings.
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The exchange, whose stateside operations began in Seattle in 2013, chose to cease all operations in the country on April 30 of this year. Some might have hoped that troubles were over. However, the firm did not simply wind up. On May 8, it announced a decision to file for Chapter 11 bankruptcy. In a statement at the time, the company emphasized that operations would continue as normal for all non-US customers.
The statement continued:
“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 will be able to withdraw them.”
Bittrex US Faced Legal Action From the SEC
Before its bankruptcy filing, the exchange was also looking down the barrel of a legal fight with the Securities and Exchange Commission (SEC). The SEC’s Wells Notice accused the company of conducting exchange, broker-dealer, and clearinghouse activities without proper registration. A Wells Notice lets a firm know that the SEC has detected wrongdoing and formal charges are on the way.
During the period between 2017 and 2022, Bittrex US reportedly earned “at least $1.3 billion in revenues.” The agency leveled similar charges against Binance and Coinbase last week as the regulator stepped up its battle against the crypto industry.
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