Bittrex owes $29 million on penalties for sanctions violations and may still face penalties in a case brought by the SEC.
The United States Justice Department (DOJ) has filed an objection to a motion by bankrupt cryptocurrency trading platform Bittrex to allow customers to withdraw their crypto and fiat. The U.S. Treasury’s Office of Foreign Asset Control (OFAC) is Bittrex’s biggest creditor, but its claim would be subordinated under the Bittrex proposal.
Bittrex was charged in October by both OFAC and the Treasury’s Financial Crimes Enforcement Network (FinCEN) with sanctions violations for allowing individuals based in Crimea, Cuba, Iran, Sudan and Syria to carry put transactions from 2014 to 2017. The agencies assessed penalties of $24 million and $29 million, respectively.
A Bittrex spokesperson told Cointelegraph at the time that the exchange was “pleased” to resolve the charges. It agreed to pay the $24 million of its penalty to FinCEN, receiving $5 million credit from FinCEN, while OFAC credited Bittrex $24 million, which remains Bittrex’s largest debt.
Related: On the shutdown of Bittrex in the US and SEC actions — Bittrex Global CEO at Consensus 2023
The crypto platform’s problems did not stop there. The U.S. Securities and Exchange Commission sued Bittrex for unregistered securities operations in April, and that action could also result in monetary penalties. In May, Bittrex declared bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. Within days of its bankruptcy filing, Bittrex proposed a plan to make customers whole.
Interesting. Number One creditor for #Bittrex is OFAC (Office of Foreign Assets Control) responsible for AML (Anti Money Laundering) admin & enforcer of economic & trade sanctions based on US foreign policy & national security goals. Now we know why they went into Chapter 11. pic.twitter.com/sAg96t3jv3
— Simon Dixon (@SimonDixonTwitt) May 9, 2023
The DOJ argued in its June 7 filing that the Bittrex proposal improperly applies the standard that would allow it to pay some creditors ahead of others. The filing stated:
“Fairness and equity demand that if the OFAC and FinCEN Debts cannot be paid in full by confirmation, the United States should have a chance to prove that the cryptocurrency assets belong to the Debtors and can be clawed back from the customers.”
The DOJ also objected that the Bittrex motion is premature, as the Bittrex bankruptcy has yet to be confirmed by the court. The bankruptcy hearing will be held on June 14.
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