Amid the unfolding bankruptcy of cryptocurrency exchange Bittrex US, the US government has opposed the platform’s proposal to allow customers to withdraw their crypto assets.
The US government has responded to a request by Bittrex US, the now bankrupt cryptocurrency exchange, to allow the release of customer funds. The proposal, which was prepared in response to Bittrex US’s intent to enable customers to withdraw cryptocurrency assets, has been met with opposition from the government which has scheduled a hearing for June 14.
The government argues that the Bittrex proposal is premature and is unfairly trying to prioritize creditors outside of the approved plan. This dispute was influenced by the fact that the US company Bittrex currently has a debt of $5 million to the Financial Crimes Enforcement Network (FinCEN).
Government demand and controversy
The original US Bittrex proposal proposed classifying creditors in order of repayment importance. However, the government questions the necessity of such a designation, arguing that issues surrounding ownership of crypto assets must be resolved before the plan can be confirmed.
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The government’s position on confirming the plan
The government contends that subdividing creditors outside of a confirmation of charges hearing is not appropriate. As such, it insists that the issues involved must be discussed after the plan has been established and confirmed.
The government’s legal team explains, “Whether clients hold interests in rem or claims against debtors is not an issue that needs to be resolved right now. For now, clients can be allowed to withdraw their crypto assets, but they must go through potential avoidance measures upon confirmation in the event of non-compensation.” all creditors in full.
Bittrex US has declared bankruptcy following accusations from the US Securities and Exchange Commission of operating an unregistered securities exchange. The ongoing developments underscore the complexity of bankruptcy cases involving cryptocurrencies and are likely to set precedents for similar cases in the future.