The firm’s U.S. arm filed for bankruptcy on May 8 after regulators accused it of operating an unlawful securities exchange and after it reached a settlement worth around $30 million with the Treasury for allowing business from customers in Iran, Cuba, and Crimea, according to a Wednesday court filing.
Bittrex, a bankrupt crypto exchange, has proposed a plan to return customer cash and crypto, but the U.S. government is challenging the proposal. The U.S. is still owed millions for sanctions violations and is not in favor of the plan. The U.S. government’s Financial Crimes Enforcement Network (FinCEN) is owed $5 million and believes that siloing creditors into subordinated classes outside of the confirmation hearing is improper.
Bittrex’s U.S. arm holds $50 million in customer cash and $250 million in customer crypto, while the Maltese operating company holds $120 million in customer cash and crypto. Lawyers representing the company have previously told the Delaware court that there are enough assets to honor withdrawals.
The U.S. government has previously intervened in crypto bankruptcy plans, such as when the Securities and Exchange Commission (SEC) argued that the fine print of Binance’s offer to buy the assets of defunct crypto lender Voyager would have absolved those involved from breaches of tax or securities law. The SEC has since sued Binance.
A hearing on Bittrex’s plan to allow withdrawals will be held June 14.