The court left open the question of whether government claims should take precedence; FinCEN and OFAC gave Bittrex credits totaling several million dollars.
Following an order from a judge in the United States Bankruptcy Court for the District of Delaware, Bittrex, a cryptocurrency trading site, is scheduled to start customer withdrawals on June 15. The order follows the withdrawal, resolution, or merits-based rejection of objections to the platform’s plan.
The problem of the subordination of U.S. government claims, which had given rise to criticism of Bittrex’s plan, is not resolved by the judge’s ruling. It does not decide whether cryptocurrency assets or the transactions that include them are regarded as securities.
The order makes it clear that it does not establish the order of creditors or bar the United States from seizing assets from clients who default on their debts. Bittrex’s largest creditor is the U.S. Treasury’s Office of Foreign Assets Control (OFAC), to which the platform owes $24 million.
The Seattle-based Bittrex had previously stated that it planned to stop doing business in the US by the end of April. The U.S. Securities and Exchange Commission launched a lawsuit against the platform in May for conducting unregistered securities transactions.
Bittrex had to pay fines to the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN) of the Treasury before declaring bankruptcy. For violations of the sanctions against Crimea, Cuba, Iran, Sudan, and Syria, FinCEN levied a $29 million fine, while OFAC levied a $24 million fine. At that time, Bittrex was given a $5 million credit by FinCEN and a $24 million credit by OFAC.
The Bittrex developments illustrate the legal issues and regulatory difficulties that cryptocurrency exchanges doing business in the United States must deal with. Although the court ruling and resolution of the objections let Bittrex to proceed with user withdrawals, they do not entirely resolve the larger issues brought up by the platform’s legal and regulatory issues.