Bittrex Inc. Faces Regulatory Accusations Before Bankruptcy Filing

The well-known cryptocurrency exchange Bittrex Inc. is currently facing legal issues after being accused of breaking many Florida laws. The Florida Office of Financial Regulation (OFR), which rejected Bittrex’s request for an Automatic Stay, made the accusations. Just before the exchange declared bankruptcy, these claims started to circulate. In this post, we’ll examine the specifics of the regulatory charges as well as the timeline of what happened before Bittrex filed for bankruptcy.

Florida OFR’s Opposition to Bittrex’s Request

The Florida OFR’s associate general counsel, Brandon Greenberg, disagreed with Bittrex’s request for an automatic stay. The request was made in order to stop some creditors from filing or prosecuting lawsuits against the insolvent estate. Greenberg disclosed that Bittrex Inc. has received advice from the OFR on possible ways to resolve the allegations against them. The regulator had charged the exchange with a number of infractions, including failing to keep customer assets separate and always maintaining a surety bond.

The Multistate Examination and Enforcement Actions

The OFR worked with financial watchdogs from Texas, Maryland, and Michigan between October 2022 and March 2023 to undertake a thorough investigation into Bittrex Inc. The OFR issued a three-count complaint to the exchange on April 17 as a consequence of the inquiry. The U.S. Securities and Exchange Commission (SEC) also charged the business with breaking the law by acting as a broker, clearing agency, and securities exchange.

After receiving the complaint, the OFR instructed Bittrex Inc. to pursue administrative processes if they were interested in having a meaningful conversation and looking into settlement possibilities. Greenberg said that instead of enabling Bittrex to renounce its license and depart Florida, the exchange voiced its unhappiness with the enforcement measures adopted by the OFR. Additionally, the platform did not announce its intentions to declare bankruptcy at that time.

Pattern of Noncompliance

On April 30, Bittrex Inc. gave up its money transmitter license, although the platform’s legal team contended that they had been in compliance with Florida law ever since the regulatory problems first appeared. The examination results that showed persistent violation with Florida’s money services industry laws were used by Greenberg to rebut these assertions. It was up to the OFR to choose which legal transgressions to allege in their administrative complaint.

Bittrex Inc. declared bankruptcy in the state of Delaware on May 8. Following the Florida OFR and exchange conversations following the regulatory complaints, the submission was made.