The US Department of Justice (DOJ) has opposed the plan of bankrupt cryptocurrency exchange Bittrex to repay its customers ahead of its creditors and fines. The DOJ claims that Bittrex owes more than $100 million in taxes and penalties to the US government and that its customers are not entitled to preferential treatment.
Bittrex filed for bankruptcy in May 2023, after suffering a series of cyberattacks, regulatory actions, and lawsuits that drained its liquidity and reputation. The exchange claimed that it had about $200 million in assets and $500 million in liabilities, including $250 million owed to its customers.
In May 2023, Bittrex proposed a plan to repay its customers first, before paying its creditors and fines. The exchange argued that its customers are the “lifeblood” of its business and that their trust and loyalty are essential for its survival. Bittrex also said it intends to resume its operations once it emerges from bankruptcy.
Bittrex’s Payment Plan Has Hit a Wall in the Form of the DOJ
However, the DOJ objected to this plan in a court filing on June 6, 2023. The DOJ said that Bittrex owes more than $100 million in taxes and penalties to the Internal Revenue Service (IRS) and the Financial Crimes Enforcement Network (FinCEN) for failing to comply with anti-money laundering (AML) and tax reporting requirements. The Department also said that Bittrex’s customers are not creditors, but rather “depositors” who have no priority over other claims.
The DOJ argued that Bittrex’s plan would violate the Bankruptcy Code, which requires that all claims be paid in a particular order of priority. The DOJ also said that Bittrex’s plan would harm the public interest by allowing the exchange to evade its tax and AML obligations and undermining the US government’s enforcement efforts.
The bankruptcy court will decide whether to approve or reject Bittrex’s plan in a hearing scheduled for June 14, 2023. If the plan is approved, Bittrex’s customers could receive their funds within 90 days. If the plan is rejected, Bittrex’s customers could face a long and uncertain wait for their money.
Bittrex is one of the oldest and largest cryptocurrency exchanges in the US, founded in 2014 by former Microsoft employees. The exchange offers trading in more than 200 cryptocurrencies and tokens, including Bitcoin, Ethereum, XRP, and Dogecoin. However, the exchange has faced several challenges in recent years, such as hacking incidents, regulatory scrutiny, legal disputes, and customer complaints.
