On Monday, Seattle-based cryptocurrency exchange Bittrex Inc filed for Chapter 11 bankruptcy protection after ceasing operations in the United States on April 30. The company said the move wouldn’t impact its foreign subsidiary Bittrex Global, which serves non-US customers and is headquartered in Vaduz, Liechtenstein.
“For those customers who did not withdraw their funds from the platform prior to the end of April, your funds remain safe and secure, and our main priority is to ensure that our customers are made whole. While the Bankruptcy Court will ultimately decide the method by which those funds can be claimed by and distributed to our customers, we intend to ask the court to activate those accounts as soon as possible so that customers meeting the necessary regulatory requirements will be able to withdraw them,” the exchange’s statement reads.
In its bankruptcy filing, Bittrex listed more than $500 million in both assets and liabilities and more than 100,000 creditors. An established crypto exchange that once ranked as the US biggest platform for trading digital assets, Bittrex offered 150 unique cryptocurrencies and boasted over 600,000 active users with non-zero balances. However, its days of glory were cut short first by Luna crash, and then by the FTX collapse that brought increased audit requests from the state regulators, which further diverted “substantial resources away from daily operations,” Bittrex said.
As trading volume plummeted and prices sank in the aftermath of crypto winter, Bittrex’s revenue in 2022 was only $17 million, down 97.4% from the record $663 million in 2017.
In March, the company received a Wells notice from the SEC — a formal warning that may be followed by enforcement action — and announced it will exit the United States by the end of April, citing "the current U.S. regulatory and economic environment." At the same time, the exchange’s general counsel David Maria told the Wall Street Journal that they would fight the suit unless the regulator provided a "reasonable settlement offer."
And the lawsuit didn’t take long — on April 17, SEC filed a complaint against Bittrex US and its former CEO William Shihara, alleging that the exchange earned at least $1.3 billion in illicit revenues from 2017 through 2022, acting as an unregistered securities broker-dealer. Six tokens were named securities in the suit: Algorand (ALGO), OMG Network (OMG), Dash (DASH), Monolith (TKN), Naga (NGC), and Real Estate Protocol (IHT).
Bittrex becomes the latest in a series of crypto bankruptcies, following FTX, Three Arrows Capital, BlockFi, Voyager, and Genesis, which were impacted by Terra/Luna collapse in May 2022. The domino effect stemming from Terra’s UST broken peg was particularly damaging due to the crypto industry being highly leveraged and interconnected. Bittrex, however, says it wasn’t their case, as the exchange never offered any yield products.
In a bankruptcy filing, Bittrex emphasized that it “did not risk, hypothecate, or loan cryptocurrencies needed to meet their contractual obligations to their customers,” saying that filing for Chapter 11 was only the final phase of the company’s orderly exit from the US.
As Bittrex’s CEO and co-founder Richie Lai put it, the bankruptcy filing was “the cleanest way to bury the baby.” The executive added that the exchange still has “100% of all customer funds.”