To protect justice and equity, the US DOJ opposes the bankrupt Bittrex’s plan to reimburse users before crediting fines.
- The (DOJ) rejects Bittrex’s move to permit users to withdraw their crypto and fiat assets after the company filed for bankruptcy.
- Due to violations of sanctions, Bittrex owes the Office of Foreign Assets Control (OFAC) $29 million in fines, as well as $24 million to the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The recently filed motion by the bankrupt cryptocurrency exchange Bittrex to allow users to withdraw their crypto and fiat assets has been opposed by the US Justice Department (DOJ). The U.S. Treasury’s Office of Foreign Assets Control (OFAC), Bittrex’s largest creditor, has voiced serious concerns about the proposed repayment scheme since Bittrex is now facing fines for sanctions violations.
Background: Bittrex’s Sanctions Violations and Penalties
Bittrex was accused of breaking sanctions in October by OFAC and the Treasury’s Financial Crimes Enforcement Network (FinCEN) for permitting people to transact in Crimea, Cuba, Iran, Sudan, and Syria between 2014 and 2017. OFAC and FinCEN subsequently levied fines of $24 million and $29 million, respectively. Bittrex responded favorably to the accusations and indicated pleasure in resolving the situation. As part of the deal, Bittrex agreed to give FinCEN $24 million in exchange for a $5 million credit. Furthermore, Bittrex received a $24 million credit from OFAC, making this the exchange’s most significant debt.
Additional Challenges: SEC Lawsuit and Bankruptcy
However, Bittrex’s legal issues persisted. The SEC launched a lawsuit against the crypto trading platform in April, accusing it of conducting unregistered securities transactions. This case could subject Bittrex to additional financial penalties. To protect itself from its creditors, Bittrex filed for bankruptcy in May in the U.S. Bankruptcy Court for the District of Delaware. Soon after declaring bankruptcy, Bittrex unveiled a strategy to reimburse its clients fully.
DOJ’s Objection and Rationale
The DOJ vehemently rejected Bittrex’s proposal, contending that it improperly prioritizes the payments of some creditors over others, in its submission on June 7. The DOJ argues that fairness and equity require the United States to be given a chance to demonstrate that the crypto assets belong to Bittrex and can be taken back from the consumers if the debts owed to OFAC and FinCEN cannot be adequately met through the proposed plan. The DOJ’s determination to guarantee that the obligations due to the government are adequately addressed in the bankruptcy proceedings is reflected in this objection.
Premature Motion and Upcoming Bankruptcy Hearing
The DOJ questioned Bittrex’s motion’s timeliness in addition to examining the creditors’ priority order. The DOJ claims that the action is premature because the court still needs to confirm Bittrex’s bankruptcy status. On June 14, a bankruptcy hearing will take place to decide whether Bittrex’s planned strategy will move forward. The DOJ’s argument indicates that Bittrex should wait to take any moves that would affect the reimbursement process until the court makes its ruling.
Conclusion
The cryptocurrency trading platform Bittrex, which is facing heavy fines for breaking sanctions, is forced to navigate a challenging legal system. The DOJ opposes the company’s attempt to compensate its customers through a planned plan, claiming that it compromises justice and equity. The future of Bittrex’s repayment scheme is up in the air while the court’s ruling is still being made. The outcome of the legal procedures will be keenly watched by all parties involved since it might have significant repercussions on how crypto assets are handled and how regulators, cryptocurrency platforms, and their users interact.
