Bittrex files for Chapter 11 protection amid US regulatory clampdown; why this could spell doom for Binance.US

• Bittrex exchange has filed for Chapter 11 protection weeks after the SEC lawsuit.
• Exchange has over 100,000 creditors, with estimated liabilities and assets within the $500 million to $1 billion range, court filing shows.
• The move comes months after the exchange announced plans to  close down operations in the US.
• The development could spell doom for Binance.US, which has been called out for operating an unregistered securities exchange.

Bittrex exchange has filed for Chapter 11 bankruptcy protection in Delaware, US, amid a burgeoning creditors list with court filings reporting estimated liabilities and assets aggregating between $0.5 to 1 billion. However, global operations remain unaffected. 

Notably, Bittrex was once among the largest crypto exchanges in the US, boasting a market share of approximately 23% in 2018 but has not eclipsed 1% in the last two years.

Also Read: Crypto exchange Bittrex and CEO charged by SEC for violating federal laws, deleting “problematic statements”

Bittrex files for bankruptcy, another one bites the dust

Bittrex is the latest addition to the list of crypto entities that have closed down over the past two years. The exchange suffered a rough Q1 of 2023 that compelled the retrenchment of 80 of its personnel before it announced plans to shut down operations by the end of April.

The latest move comes barely a month after the US Securities and Exchange Commission (SEC) summoned the exchange and its former CEO William Shiharawas for violating federal laws over several years.

They [Bittrex and Bittrex Global] operated an unregistered national securities exchange, broker, and clearing agency.

Although Bittrex Global CEO Oliver Linch committed that the exchange would fight the charges in court, the current bankruptcy proceeding could make this difficult.

In the latest development, court filings shared by Randall Reese of bankruptcy tracker Chapter 11 Dockets reveal that Bittrex has an estimated $500 million to $1 billion in assets and liabilities. Moreover, the filing details that two other Bittrex arms- Bittrex Malta Ltd and Bittrex Malta Holdings Ltd-have also filed for bankruptcy protection in the US Bankruptcy Court for the District of Delaware Monday.

Exchanges suffering the brute of US regulatory clampdown

Bittrex crypto exchange’s chapter 11 filing is not the first of a crypto entity bulging to the pressure of toughening regulatory action. It joins the likes of FTX and several lenders, including Celsius, Voyager, and BlockFi.

Recently, several other exchanges have suffered issues with lawsuits. For instance, the New York State Department of Financial Services (NYDFS) recently imposed a $1.2 million fine against bitFlyer USA for failing to meet the state’s cybersecurity requirements.

Before that, Coinbase and Robinhood were also subject to similar regulatory clampdowns, with the latter paying a $50 million fine for allowing users to create accounts without conducting necessary background checks. More recently, the US-based exchange has been probed for its KYC procedures. On the other hand, Robinhood’s crypto arm was fined $30 million in Q3 2022 for its unsatisfactory compliance program.

More to come

While the SEC focuses on regulating by enforcement instead of providing regulatory clarity to firms, other exchanges could suffer the brute of the SEC. Among those in the regulator’s line of sight include Binance.US, which has been called out for operating an unregistered securities exchange.

Notably, the aforementioned reason was among the reasons why Binance.US’ move to acquire Voyager Digital was initially denied.

…The staff also believes that Binance.US is operating an unregistered securities exchange in the United States.

While Binance, the global counterpart of Binance.US, insists that the US arm is separate and distinct, the move against Bittrex Global and its Delaware-based Bittrex (now insolvent) has made it unclear whether the SEC will also attack other players in the industry.

Also Read: Voyager’s $1B deal with Binance – US moves forward after deal with Feds