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


sylv1rob1/Shutterstock modified by Blockworks


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.

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

MON - WED, MARCH 18 - 20, 2024

Blockworks’ Digital Asset Summit (DAS) will take place March 18-20, 2024 at The Hilton London Metropole. Why London? Momentum.  London has become one of the world’s hottest crypto hubs.  Innovation is thriving, new institutional investors are flocking in, and regulators like […]

recent research

Research report - cover graphics-2.jpg


Base has doubled-down on its commitment to the Superchain vision, has shown early signs of success with nearly $400M in TVL, and has become home to novel dapps such as which has seen significant traction.


Kraken praised European regulation in its announcement


In the metaverse, randomness is in desperate demand — but genuinely usable random-number generators are few and far between


The Stellar-enabled wallet will roll out next year, the company stated


Binance was earlier instructed to cease serving Belgium because it offered services from countries outside the European Economic Area


Satsuma’s co-founder told Blockworks he closed the acquisition deal with Alchemy last month


Multicoin Capital and Collider Ventures led the seed round