US DOJ opposes bankrupt Bittrex’s plan to repay customers ahead of credited fines

June 8, 2023 Coin Telegraph

Bankruptcy

Bittrex owes $29 million on penalties for sanctions violations and may still face penalties in a case brought by the SEC.

The United States Justice Department (DOJ) has filed an objection to a motion by bankrupt cryptocurrency trading platform Bittrex to allow customers to withdraw their crypto and fiat. The U.S. Treasury’s Office of Foreign Asset Control (OFAC) is Bittrex’s biggest creditor, but its claim would be subordinated under the Bittrex proposal.

Bittrex was charged in October by both OFAC and the Treasury’s Financial Crimes Enforcement Network (FinCEN) with sanctions violations for allowing individuals based in Crimea, Cuba, Iran, Sudan and Syria to carry put transactions from 2014 to 2017. The agencies assessed penalties of $24 million and $29 million, respectively.

A Bittrex spokesperson told Cointelegraph at the time that the exchange was “pleased” to resolve the charges. It agreed to pay the $24 million of its penalty to FinCEN, receiving $5 million credit from FinCEN, while OFAC credited Bittrex $24 million, which remains Bittrex’s largest debt.

The crypto platform’s problems did not stop there. The U.S. Securities and Exchange Commission sued Bittrex for unregistered securities operations in April, and that action could also result in monetary penalties. In May, Bittrex declared bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. Within days of its bankruptcy filing, Bittrex proposed a plan to make customers whole.

Interesting. Number One creditor for #Bittrex is OFAC (Office of Foreign Assets Control) responsible for AML (Anti Money Laundering) admin & enforcer of economic & trade sanctions based on US foreign policy & national security goals. Now we know why they went into Chapter 11. pic.twitter.com/sAg96t3jv3
— Simon Dixon (@SimonDixonTwitt) May 9, 2023

The DOJ argued in its June 7 filing that the Bittrex proposal improperly applies the standard that would allow it to pay some creditors ahead of others. The filing stated:

“Fairness and equity demand that if the OFAC and FinCEN Debts cannot be paid in full by confirmation, the United States should have a chance to prove that the cryptocurrency assets belong to the Debtors and can be clawed back from the customers.”

The DOJ also objected that the Bittrex motion is premature, as the Bittrex bankruptcy has yet to be confirmed by the court. The bankruptcy hearing will be held on June 14.

Magazine: Rogue states dodge economic sanctions, but is crypto in the wrong?

Crypto Biz: Ripple’s expensive battle, Bittrex bankruptcy and a new blockchain network

May 13, 2023 Coin Telegraph

Arbitrum

This week’s Crypto Biz explores Arbitrum’s latest proposal, Ripple’s two-year battle with the SEC and a large corporations’ coalition to build blockchain solutions for institutional investors.

A million-dollar question in crypto might be whether tokens can be considered securities in the United States, with some crypto companies staking a lot of money on it.

For payment platform Ripple — sued by the U.S. Securities Exchange Commission (SEC) in 2020 — defense costs have already topped $200 million, Cointelegraph has learned. The SEC claims Ripple sold XRP (XRP) tokens as an unregistered security in the same way it has recently accused many other crypto companies.

Even the possibility of expensive litigation with the regulator isn’t stopping firms and projects from testing the limits of what can be considered a security. The Arbitrum Foundation — the entity behind the Arbitrum blockchain — plans to reward Ether (ETH) tokens worth over $6 million to holders of its native Arbitrum (ARB) token, according to a recent proposal in its DAO governance forum.

The tokens were generated through base fees and surplus revenue from network transactions. Although the proposal has gained support, some community members voiced concerns about the revenue distribution serving as a way to label ARB tokens as securities.

This week’s Crypto Biz explores Arbitrum’s latest controversial proposal, Ripple’s two-year battle with the SEC and a large corporations’ coalition to build blockchain solutions tailored for institutional investors.

Defending against SEC to cost Ripple $200 million, CEO Brad Garlinghouse says

A case brought against Ripple by the SEC has cost the company $200 million, said its CEO Brad Garlinghouse during a fireside chat at the Dubai Fintech Summit. Garlinghouse also said the U.S. is stuck compared with the regulatory progress in the United Arab Emirates and the recent Markets in Crypto-Assets bill in the European Union. The SEC sued the crypto payment platform in December 2020, claiming Ripple illegally sold XRP tokens as an unregistered security.

*Brad Garlinghouse during the fireside chat at the Dubai Fintech Summit.*

Microsoft, Goldman Sachs, others partner in new blockchain network

A new blockchain network for financial institutions is in the works from a conglomerate of participants in the finance and tech space, including Microsoft and Goldman Sachs. The Canton Network will be an interoperable blockchain network for companies working with institutional assets. The platform is built on Daml, the smart contract language of Digital Asset, which creates an interoperable system where “assets, data, and cash” can synchronize across linked applications.

Bittrex files for Chapter 11 bankruptcy just weeks after SEC charges

Cryptocurrency trading platform Bittrex has filed for Chapter 11 bankruptcy protection in the United States. Bittrex Global CEO Oliver Linch told Cointelegraph that the bankruptcy is part of the exchange’s wind-down of operations in the U.S., adding that funds are safe and will be handed over to the court. The move comes after the SEC charged the company and its co-founder William Shihara for securities violations in April. In October 2022, the exchange received charges from the U.S. Treasury’s Office of Foreign Assets Control. The agency is the largest creditor listed on Bittrex’s bankruptcy filing, which records a claim of $24.2 million.

*OFAC takes the top creditor spot for Bittrex with claims of $24.2 million. Source: PACER*

Arbitrum’s DAO to receive over 3,350 ETH revenue from transaction fees

Layer-2 blockchain Arbitrum plans to distribute Ether tokens worth nearly $6.2 million to its community. According to a recent proposal on its governance forum, around 3,352 ETH will be collected by Arbitrum’s decentralized autonomous organization. The funds collected come from base fees and surplus revenue generated from network transactions. Data from Crypto Fees shows that Arbitrum’s users paid $387,423 in fees over the past seven days. The proposal appears to have broad support, but some community members pointed out that the revenue distribution could classify the ARB token as a security.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto, delivered directly to your inbox every Thursday.

Crypto Exchange Bittrex Files for Bankruptcy Following SEC Enforcement Action After Nearly a Decade in Business

May 10, 2023 The Daily Hodl

Crypto platform Bittrex files for Chapter 11 bankruptcy following SEC charges

May 8, 2023 Coin Telegraph

On the shutdown of Bittrex in the US and SEC actions — Bittrex Global CEO at Consensus 2023

May 1, 2023 Coin Telegraph

Bittrex

Oliver Linch suggested jurisdictions with established frameworks for crypto and policymakers willing and able to use them were a potential winning combination for fledging firms.

Oliver Linch, chief executive officer of cryptocurrency exchange Bittrex Global, has pushed back against the United States Securities and Exchange Commission (SEC), claiming the company never had a clear opportunity to discuss a potential enforcement action.

Speaking to Cointelegraph at the Consensus 2023 conference in Austin, Texas on April 28, Linch said there had been “precisely zero” communication between Bittrex Global and the SEC prior to the financial regulator issuing a Wells notice to the company’s U.S. counterpart in March. The SEC charged Bittrex in April for operating as an unregistered exchange, broker, and clearing agency and Bittrex Global “in connection with its operation of a single shared order book along with Bittrex.”

The Bittrex Global CEO echoed many of the complaints U.S.-based crypto companies have lobbed at the SEC in regards to its position on enforcement actions, hinting the “come in and talk to us” approach often espoused by chair Gary Gensler doesn’t hold water. Upon receiving a similar Wells notice from the SEC in March, Coinbase chief legal officer Paul Grewal said the firm had met with the financial regulator “more than 30 times over nine months” but largely did not receive any feedback.

“We never heard from them, they didn’t speak to us, they didn’t ask us for any information, they had no interaction with Bittrex Global whatsoever,” said Linch on the SEC. “It’s this uncertainty that permeates everything. You just don’t know what’s coming next or where it’s going to come from or why or how in the U.S.”

In March, Bittrex announced plans to wind down its U.S. operations by April 30, specifically citing the challenging regulatory and economic environment in the United States. At the time, the exchange said regulatory requirements for crypto firms in the U.S. were “often unclear and enforced without appropriate discussion or input”. It’s unclear if the firm reached this decision prior to its Well notice.

The EU’s forward-thinking #MiCA framework supports crypto innovation, while the US’s retrofitted regulation-by-enforcement struggles to provide clarity.

Will the US lose ground to Europe's clear guidelines, or can they adapt for the future of #crypto? Only time will tell.
— Oliver Linch (@OliverLinch) April 30, 2023

Though Bittrex had operations in the United States, the global firm is regulated in Liechtenstein and Bermuda, which Linch claimed had some of the “most successful regulatory regimes in the world.” Coinbase reported in April it had received a license to operate in Bermuda as part of its plans for a derivatives exchange.

The Bittrex Global CEO suggested a “combination of regulations and regulators” as a potential winning recipe for crypto firms looking to start in the space — both the established framework for digital assets and policymakers willing and able to use it. Linch said he could see aspects of the European Union’s Markets in Crypto Assets, or MiCA, framework modeled on regulations in Liechtenstein and Bermuda.

In the United States, however, many firms continue to cite the lack of regulatory clarity in weighing whether to move operations outside the country. Lawmakers recently questioned SEC chair Gensler on digital assets during committee hearings on oversight for the financial regulator.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Pan-European crypto regulation is almost here: Law Decoded, Apr 17–24

April 24, 2023 Coin Telegraph

Bittrex

The Markets in Crypto-Assets Act, also known as MiCA, was finally passed by the European Parliament.

Last week, the Markets in Crypto-Assets Act, also known as MiCA, was finally passed by the European Parliament. While MiCA technically still has to be approved by the European Council, there’s little doubt that the world’s first comprehensive crypto framework will become a reality by 2024 or 2025.

Despite its flaws, the regulation will establish guidelines for the operation, structure and governance of digital-asset issuers. MiCA is “a milestone for the crypto asset industry,” as its rapporteur, Member of the European Parliament Stefan Berger, put it.

The crypto community welcomed the news, with Binance CEO Changpeng Zhao pledging his readiness to comply with the “pragmatic” regulation, while Gemini co-founder Tyler Winklevoss noted the lack of similar legislation in the United States.

Speaking with Cointelegraph, Patrick Hansen, director of EU strategy and policy at stablecoin issuer Circle, said that MiCA will enable European crypto firms to scale and grow faster, allowing licensed companies to offer their services throughout the world’s largest single market, representing roughly 450 million people.

It’s yet to be seen whether the United States will take a cue from MiCA or continue regulating through enforcement. At least one country has already promised to adopt MiCA nationally: The deputy chairman of Ukraine’s parliamentary Tax Committee, Yaroslav Zheleznyak, revealed that his colleagues were already working on implementing “some provisions from MiCA.”

Rep. Davidson to introduce legislation to fire SEC boss Gensler for crypto overreach

United States Representative Warren Davidson announced his intention to remove Securities and Exchange Commission Chair Gary Gensler from his role after the SEC’s latest announcement that it would revisit a proposed redefinition of an “exchange.” Davidson intends to introduce legislation that would effectively oust Gensler and replace the role with an executive director who “reports to the Board (where authority resides).”

Meanwhile, Gensler himself refused to give a clear opinion on whether Ether (ETH) should be classified as security during a congressional hearing. The SEC chair is under heavy pressure, with Representative Patrick McHenry, chair of the United States House Financial Services Committee, publicly demanding that he provide “clear rules of the road” for crypto.

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SEC charges Bittrex with unregistered operations, calls six tokens securities

Despite continuous criticism, the SEC continues to take regulatory actions against the crypto industry in the United States. Last week, the agency charged crypto-asset trading platform Bittrex and its co-founder and former CEO William Shihara with operating an unregistered national securities exchange, broker and clearing agency.

In its complaint, the commission argues that OMG, Dash (DASH), Algorand (ALGO), Monolith (TKN), Naga (NGC) and IHT Real Estate Protocol (IHT) — which are traded on Bittrex — are securities. The complaint seeks disgorgement, penalties and permanent injunctions against the defendants in a jury trial.

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Hong Kong court rules cryptocurrencies are property

In a ruling involving defunct crypto exchange Gatecoin, a Hong Kong court acknowledged cryptocurrencies as property that can be held in trust. The court deemed it appropriate to follow reasoning applied by other jurisdictions that crypto was property and could form the subject matter of a trust. The ruling could give insolvency practitioners in Hong Kong greater clarity around digital assets. Confirming that crypto constitutes property, similar to other assets like stocks, aligns Hong Kong with other jurisdictions.

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SEC Deems DASH, ALGO, and OMG ‘Unregistered Securities’ in Bittrex Lawsuit

April 18, 2023 Bitcoin.com

SEC Goes After Bittrex in New Enforcement Action, Says Algorand and Five Crypto Assets Are Securities

April 17, 2023 The Daily Hodl

The SEC Sues Bittrex for Operating Unregulated Securities Exchange

April 17, 2023 The Crypto Briefing

SEC charges Bittrex with unregistered operations, calls six tokens securities

April 17, 2023 Coin Telegraph

Bittrex

The U.S. Securities and Exchange Commission has filed a complaint against the Seattle-based exchange as Bittrex prepares to stop offering services in the United States.

The United States Securities and Exchange Commission (SEC) has charged the crypto asset trading platform Bittrex and its cofounder and former CEO William Shihara for operating an unregistered national securities exchange, broker, and clearing agency. The agency filed a separate charge against Bittrex Global.

The SEC is pressing four charges of Exchange Act violations against the companies and Shihara in the U.S. District Court Western District of Washington. Bittrex Global is also being charged “in connection with its operation of a single shared order book along with Bittrex.”

The SEC argued in its complaint that the OMG (OMG), Dash (DASH), Algorand (ALGO), Monolith (TKN), Naga (NGC) and IHT Real Estate Protocol (IHT) tokens traded on Bittrex are securities. The SEC has been criticized in the past for the practice of “regulation by enforcement” by claiming tokens are securities only at the time when it files such complaints, and not prior.

Today we charged crypto asset trading platform Bittrex Inc. and its co-founder and former CEO William Shihara for operating an unregistered national securities exchange, broker, and clearing agency.https://t.co/kBsIFMp7ZA
— U.S. Securities and Exchange Commission (@SECGov) April 17, 2023

The agency also claims Bittrex and Shihara advised clients to delete “problematic statements” to avoid regulatory scrutiny. The SEC complaint sought disgorgement, penalties and permanent injunctions against the defendants in a jury trial. SEC enforcement division director Gurbir Grewal said in a statement:

“Today’s action not only holds Bittrex accountable for misconduct that we allege put investors at risk, but should also send a message to other non-compliant crypto market intermediaries to follow the federal securities laws or be held accountable for their violations."

Bittrex was expecting the SEC action and reportedly received a Wells Notice warning it of the impending action in March. The exchange had already announced its intention of closing down U.S. operations on April 30 due to the regulatory environment.

Bittrex was hit with charges from the U.S. Treasury’s Office of Foreign Assets Control and Financial Crimes Enforcement Network in October for violating sanctions programs and the Bank Secrecy Act.

Bittrex did not respond immediately to a Cointelegraph request for comment.

Magazine: SEC targets Coinbase, Do Kwon arrested and FTX sells $95M in Mysten Labs: Hodler’s Digest, March 19-25

Bittrex

Defending against SEC to cost Ripple $200 million, CEO Brad Garlinghouse says

Microsoft, Goldman Sachs, others partner in new blockchain network

Bittrex files for Chapter 11 bankruptcy just weeks after SEC charges

Arbitrum’s DAO to receive over 3,350 ETH revenue from transaction fees

Rep. Davidson to introduce legislation to fire SEC boss Gensler for crypto overreach

SEC charges Bittrex with unregistered operations, calls six tokens securities

Hong Kong court rules cryptocurrencies are property

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