Bittrex customer repayment plan faces US government objection. According to a court filing on Wednesday, the United States has posed a legal obstacle to a plan put forth by Bittrex, a bankrupt cryptocurrency exchange, to reimburse customers with cash and cryptocurrency.
Bittrex Customer Repayment Plan Faces U.S. Government Objection
According to a court filing on Wednesday, the United States has raised a legal objection to a proposal put forth by Bittrex, a bankrupt cryptocurrency exchange, regarding the return of customer funds and cryptocurrencies. The U.S. government claims that it is still owed millions of dollars due to sanctions violations.
Bittrex‘s American division filed for bankruptcy on May 8 following allegations from regulators that it operated an illegal securities exchange. Additionally, the company reached a settlement of approximately $30 million with the Treasury for enabling transactions from customers in Iran, Cuba, and Crimea.
Just four days after filing for bankruptcy, the company requested court approval to allow customers to withdraw their holdings without the expenses and delays associated with litigation. The U.S. government, owed $5 million through its Financial Crimes Enforcement Network (FinCEN), argues against showing favoritism.
The government’s court filing stated that it is improper to categorize creditors into subordinate classes outside of the confirmation hearing. They also mentioned that Bittrex has not provided sufficient justification for determining ownership of cryptocurrency assets before confirming the bankruptcy plan.
Bittrex’s U.S. arm currently holds $50 million in customer cash and $250 million in customer cryptocurrencies, while the Maltese operating company, also in bankruptcy, holds $120 million in customer funds and cryptocurrencies. According to lawyers representing the company, both entities possess sufficient assets to fulfill customer withdrawals.
Previous interventions by the government have effectively thwarted cryptocurrency bankruptcy plans. For instance, Binance’s offer to acquire the assets of defunct crypto lender Voyager was abandoned due to delays caused by the Securities and Exchange Commission (SEC), which argued that certain provisions in the agreement would absolve involved parties from violations of tax and securities laws. The SEC subsequently filed a lawsuit against Binance.
A hearing regarding Bittrex’s proposal to allow withdrawals will take place on June 14.
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