Introduction

The bankruptcy case of cryptocurrency exchange Bittrex US has led to a dispute with the US government over the proposed allowance of customer withdrawals of encrypted assets.

Bittrex US Requests Customer Money Issuance

Bittrex US, now bankrupt, requested permission from the US government to enable customer withdrawals of cryptocurrency assets. However, the government responded by setting a hearing for June 14th, stating that the proposal is premature and unfairly prioritizes creditors outside of the approved plan. Complicating matters is the fact that Bittrex US currently owes $5 million to the Financial Crimes Enforcement Network (FinCEN).

Government’s Demand and Controversy

Originally, Bittrex US proposed to classify creditors to indicate who should receive reimbursement. However, the government argues that this rating is unnecessary, given the issues surrounding the property of cryptocurrency assets. The government maintains that the division of creditors into subcategories outside the confirmation hearing is not proper and insists that these issues should be resolved before the plan is confirmed.

Government Position on Plan Confirmation

The government’s legal team maintains that customers owning in-kind interests or claims against debtors is not an issue that needs to be resolved now. Currently, customers can be allowed to withdraw their cryptocurrency assets but should be exposed to potential avoidance actions in confirmation if not all creditors are fully compensated.

The bankruptcy of Bittrex US follows accusations from the SEC for operating an unregistered stock exchange. These developments highlight the complexity of bankruptcy cases involving cryptocurrencies and may set precedents for similar cases in the future.