The US government objects to the withdrawal of Bittrex clients

The US government objected to Bittrex’s Motion for Entry to allow customer withdrawal requests to be honored.

According to a filing in the US Bankruptcy Court, the US objected to a proposal that allowed Bittrex to honor customer withdrawals.

US argues against allowing Bittrex customer withdrawals

Last month, Bittrex applied to court to allow crypto assets to be withdrawn by their customers or “significant sellers.” But the US government objects to the deposit on the following grounds:

  1. Important seller standard does not support the requested relief
  2. It is premature and
  3. Inappropriately attempts to subordinate subordinate creditors out of plan.

Can exchange customers be paid before other creditors?

In the filingThe government argues that Bittrex should not pay its customers before other creditors. Among other creditors, it was revealed that Bittrex owed the US Financial Crimes Enforcement Network (FinCEN) $5 million.

Last year, the US Treasury’s Office of Foreign Assets Control (OFAC) and FinCEN fined Bittrex $53 million for engaging in business activities with residents of sanctioned countries.

Finally, the government argues, customers do not qualify as valuable sellers:

Critical sellers, without payment, would cease to provide goods and services essential to the debtor’s business, hastening the collapse of the debtor’s business and making reorganization impossible.

Instead of reorganizing, the debtors intend to liquidate and close their disbursement. Debtors will not have business soon and will have no customers, sellers or creditors in the future.”

The government wants the stock exchange to make its creditors complete through bankruptcy plans rather than prioritizing customers. The question is raised due to government objections whether Justice will be done or the customers will suffer.

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On March 31, the exchange announced that it was leaving the United States due to the changing regulatory climate. However, a notice was filed from Wells, and eventually a lawsuit from the US Securities and Exchange Commission (SEC).

Bittrex US had to file for Chapter 11 bankruptcy on May 9.

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