On May 10, Bankrupt cryptocurrency exchange Bittrex Inc received court permission to borrow $7 million in bitcoin to fund the start of its Chapter 11 case.
Seattle-based Bittrex filed for bankruptcy Monday, citing the U.S. regulatory environment had become untenable after the SEC sued the company for allegedly running an unregistered securities exchange. Before filing for bankruptcy, Bittrex stopped accepting new deposits from U.S. customers and told its existing users to withdraw their crypto from the platform. Bittrex’s U.S. operations made up a minority of its overall users, with affiliated exchanges based in Liechtenstein and Bermuda accounting for about 77% of the company’s 5.4 million users as of March 27.
Bittrex believes that it has enough cryptocurrency to fully repay all remaining customers, and the bankruptcy loan will ensure a smooth wind-down that protects customer assets. U.S. Bankruptcy Judge Brendan Shannon approved the loan on an interim basis, allowing Bittrex to borrow 250 bitcoin from its parent company Aquila Holdings. Bittrex will seek permission to borrow an additional 450 bitcoin at a hearing in June, and the total value of its proposed loan is $19.7 million, based on bitcoin prices when it filed for bankruptcy.
Shannon also approved temporary privacy protections allowing Bittrex to remove customer names from court documents. Patricia Tomasco, an attorney for Bittrex, noted that one large accountholder has more than $14 million in crypto still on Bittrex’s platform, saying that revealing that customer’s name would subject them to a barrage of phishing emails. Shannon said he will revisit the privacy issue at a later hearing.
Reporting by Dietrich Knauth. Our Standards: The Thomson Reuters Trust Principles.