Bittrex US request to return customer funds ‘premature,’ government argues

The US government is opposing a motion from Bittrex to return customer funds — at least for now

article-image

sylv1rob1/Shutterstock modified by Blockworks

share

The US government is opposing a motion to allow bankrupt crypto exchange Bittrex US to return customer funds. 

The government’s response comes after Bittrex US filed a motion “authorizing the debtors to honor withdrawals of cryptocurrency assets by customers.”

A hearing will be held on June 14. 

Essentially, the US government is saying that the motion is “premature” and “it improperly attempts to subordinate creditors outside of a plan.”

The latter is due, in part, to the fact that Bittrex US owes the Financial Crimes Enforcement Network (FinCEN) $5 million.

“Fairness and equity demand that if the [Office of Foreign Assets Control] and FinCEN Debts cannot be paid in full by confirmation, the United States should have a chance to prove that the cryptocurrency assets belong to the Debtors and can be clawed back from the customers as prepetition preferences and pre-confirmation sub rosa distributions,” the filing states.

In the original Bittrex US motion, it sought to categorize creditors in order of importance to repay.

The government denies that categorization is necessary, stating that Bittrex US “demonstrated why the issues of ownership of cryptocurrency assets need to be determined prior to the confirmation of the Plan. Finally, siloing creditors into subordinated classes outside of the confirmation hearing is improper. For these reasons, which are discussed more fully below, the Motion must be denied.”

Instead, the government wants these issues discussed once a plan is established and confirmed. 

The lawyers continued, “similarly, whether the customers hold in rem interests or claims against the Debtors is not an issue that needs to be determined now. Customers can, presently, be allowed to withdraw the cryptocurrency assets in accounts now, but should be subject to potential avoidance actions at confirmation should all creditors not be paid in full.”

Bittrex US filed for bankruptcy after it was charged by the SEC with running an unregistered securities exchange.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Avail.jpg

Research

Data publishing costs have historically been a bottleneck for rollups, and as more rollups launch, interoperability will continue to be a major challenge. Avail presents a potential solution to rollup fragmentation through its three products: Avail DA, Nexus, and Fusion, which together aim to unify the web3 experience.

article-image

The Bitcoin halving is a spectacle that only comes round once every four years

article-image

The SEC alleges that Justin Sun spent nearly 400 days in the US from 2017 to 2019

article-image

Short-term “sell the news” reactions could follow new BTC price peaks months from now, industry watchers say — but only if history repeats itself

article-image

While crypto fundraising remains well off its bull market highs, Q1 data shows capital is returning to the space

article-image

Billed as a better BRC-20 fungible token standard, Bitcoin Runes launches tomorrow

article-image

Bitcoin miners need to explore unconventional energy avenues or be buried by the financial realities created by this halving