The U.S. administration has raised objections to the proposed customer repayment plan put forth by Bittrex, the bankrupt cryptocurrency exchange.
The objections come after regulatory allegations of illegal securities exchange operations and unauthorized transactions. The U.S. government argues against prioritizing creditors and seeks a different approach.
Bittrex’s U.S. subsidiary filed for bankruptcy in May following allegations of running an illegal securities exchange and engaging in unauthorized transactions.
The exchange had previously settled with the Treasury for $53 million due to violations involving customers from Iran, Cuba, and Crimea.
Bittrex sought court approval to allow customers to withdraw their funds without the need for costly litigation.
However, the U.S. government filed an objection, deeming the proposed plan improper and highlighting concerns about siloing creditors into subordinated classes outside the confirmation hearing.
Bittrex’s U.S. division holds approximately $50 million in customer cash and $250 million in crypto assets. Additionally, the operational company, which also declared bankruptcy, possesses $120 million in customer funds and cryptocurrencies. Attorneys representing the group assure that there are enough assets to fulfill withdrawal requests.
In April, the Securities and Exchange Commission (SEC) charged Bittrex and its former CEO Bill Shihara with deliberately violating federal securities laws.
The SEC accused them of instructing crypto asset issuers to remove statements indicating securities status from their offering papers.
The regulators also alleged that Bittrex earned over $1.3 billion in transaction fees without proper registration or compliance with U.S. securities laws.