Bankruptcy filings by crypto entities also don’t seem to stop in 2023. Seattle-based crypto exchange Bittrex filed Chapter 11 bankruptcy on May 8, 2023, three weeks after the U.S. SEC’s lawsuit. The exchange ceased its U.S. operation on April 30. However, the filing says this bankruptcy would not affect Bittrex Global, based in Liechtenstein, Europe. The entity serves customers outside America.
The assets and liabilities of the crypto exchange were between $500 Million and $1 Billion, as per the filings. The customers’ assets failing to withdraw before April 30 are said to be safe and secure on the exchange. This is about requesting the bankruptcy court to allow limited re-opening so these funds can be distributed back to owners.
The United States Securities and Exchange Commission (SEC) sued Bittrex on April 17, 2023, alleging that the former CEO, William Shihara, purposefully encouraged the crypto asset issuers willing to list on the exchange to delete the public statements, which might draw the attention of the regulators as they could try to investigate the platform for offering securities.
Bittrex denied the allegations, arguing that the crypto assets available on the platform are not securities or investment contracts. Also, the lawsuit remains open and underway till further progress. Global CEO, Oliver Linch, argued that the exchange intended to fight the SEC’s charges in court, but these bankruptcy proceedings could not make matters more difficult to handle.
It should be noted that Bittrex had agreed to pay a fine of $29 Million to the United States Treasury Department. The exchange was involved in violation of sanctions on other countries and Anti-Money Laundering laws.
The petition filed in bankruptcy court lists the Treasury Department’s Office of Foreign Asset Control as their largest unsecured creditor, with more than $24 Million owed to the agency. The remaining creditors include other crypto exchanges. Filings also listed 16 customers without disclosing their names, having a minimum of $1 Million in their accounts. Also, a big customer with $14.6 Million worth of assets is on the list.
Crypto Industry’s Major Bankruptcies and Layoff 2023
In 2022, many crypto entities went into bankruptcy; probable causes listed were; the harsh crypto winter, dropping asset prices, and increased regulatory scrutiny. Significant examples were the Terra Ecosystem Collapse, FTX-Saga, 3AC, etc. All these incidents created a hostile environment in the industry, calling for worldwide regulations.
Even though the crypto winter is believed to be over, and Bitcoin almost touched the $31,000 mark for the first time in 11 months, some entities in the industry are battling bankruptcy and laying off employees.
Genesis and two of its subsidiaries applied for Chapter 11 bankruptcy protection in January 2023. Crypto.com had to initiate its second round of layoffs in the past six months. Blockchain.com is reportedly firing 110 people or 28% of its workforce. Digital Currency Group (DCG), the cryptocurrency conglomerate, announced the closing of its wealth management subsidiary HQ in January 2023.
Also, three major crypto-friendly banks, Silvergate Bank, Silicon Valley Bank, and Signature Bank, were closed in 5 days in March 2023. Such layoffs and bankruptcies are bad for the industry and worse if they happen in quick succession. The industry’s overall growth can curb this menace, but it can be achieved by amalgamating regulatory bodies, lawmakers, and crypto industry leaders.
