WASHINGTON—The Justice Department is objecting to bankruptcy plan filed by Bittrex, a cryptocurrency exchange that owes millions of dollars in fines to the government.
The DOJ claims the plan would unfairly prioritize the repayment of customers over the payment of penalties, Yahoo Finance said.
Bittrex filed for Chapter 11 bankruptcy protection in November 2022 after the Securities and Exchange Commission and the Commodity Futures Trading Commission charged it with operating an unregistered securities exchange and violating anti-money laundering rules. The regulators imposed a total of $80 million in fines on Bittrex, which it has yet to pay.
$200 Million for Repayment
According to its bankruptcy plan, Bittrex intends to use its remaining assets, estimated at $200 million, to repay its customers who have been unable to access their funds since the exchange shut down, Yahoo Finance reported. The plan also proposes to create a trust that would hold 10% of Bittrex's equity and distribute it to the government agencies once the company emerges from bankruptcy.
“However, the DOJ argues that this plan violates the Bankruptcy Code, which requires that creditors with similar claims be treated equally,” stated Yahoo Finance. “The DOJ says that the customers and the regulators are both unsecured creditors, and therefore should receive the same percentage of recovery. The DOJ also questions the valuation of Bittrex's equity and the feasibility of its reorganization.”
Hearing Set for January
The bankruptcy court will hold a hearing on Jan. 15, 2023, to decide whether to approve or reject Bittrex's plan.
“The outcome of this case could have significant implications for the cryptocurrency industry, as it could set a precedent for how exchanges deal with regulatory fines and customer claims in the future,” Yahoo Finance added.
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