Bittrex Inc, a Seattle-based cryptocurrency exchange, receives approval from a U.S. bankruptcy court for a $7 million bitcoin loan. The loan marks the start of its Chapter 11 bankruptcy proceedings. The company filed for bankruptcy, intending to return customer funds and halt U.S. operations.
However, Bittrex’s global affiliates will continue operating crypto exchanges for non-U.S. customers. The decision to wind down U.S. operations is primarily due to regulatory challenges, following a lawsuit by the Securities and Exchange Commission (SEC). The SEC alleges that Bittrex operated an unregistered securities exchange.
Prior to filing for bankruptcy, Bittrex ceased accepting new deposits from U.S. customers. The organization also urged existing users to withdraw their cryptocurrencies from the platform. It is worth noting that Bittrex’s U.S. operations represented a minority of its total user base.
According to court documents, Bittrex’s exchanges in Liechtenstein and Bermuda represented about 77% of its 5.4 million users as of March 27.
Bittrex expressed confidence in its ability to fully repay all remaining customers.
It states that it possesses sufficient cryptocurrency assets to do so. The approved bankruptcy loan of 250 bitcoin, granted by Bittrex’s parent company Aquila Holdings, will facilitate an orderly wind-down process. This will also help safeguard customer assets, as stated by attorney Susheel Kirpalani during a court hearing held in Wilmington.
U.S. Bankruptcy Judge Brendan Shannon granted interim approval for the loan, recognizing the advantages it offers compared to traditional bankruptcy loans. These benefits include a relatively low 4% interest rate and safeguards against bitcoin’s price volatility.
Bittrex intends to repay the loan in bitcoin. According to court documents, there is no obligation for it to pay more than 110% of bitcoin’s current value. This applies regardless of the additional bitcoin required to meet loan repayment obligations.
Furthermore, Shannon approved temporary measures to protect customer privacy, allowing Bittrex to remove customer names from court documents. Bittrex’s attorney, Patricia Tomasco, highlighted the risk of exposing customers to phishing emails. She also cites an account holder with over $14 million in cryptocurrency still held on the platform. The court will revisit the privacy issue in a future hearing.
The bankruptcy case is officially known as Bittrex Inc. It is filed with the U.S. Bankruptcy Court for the District of Delaware under the docket number 23-10598.