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Bittrex Faces Challenge From Florida Authorities With Pre-Bankruptcy Claims

Key Points:

Cryptocurrency exchange Bittrex is accused of violating state laws and regulatory requirements.
Florida OFR opposes Bittrex’s request for Automatic Stay and files a complaint.
The exchange also surrenders its license, files for bankruptcy, and questions SEC jurisdiction.

In a recent development, Bittrex, a cryptocurrency exchange, has come under scrutiny for allegedly violating multiple state laws, as revealed in court filings.

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The Florida Office of Financial Regulation (OFR) has accused Bittrex of various violations, including the failure to properly segregate customer assets and maintain a sufficient surety bond.

The OFR’s filing opposes Bittrex’s request for Automatic Stay, which aims to prevent certain creditors from taking action against the bankrupt estate. Assistant General Counsel Brandon Greenberg highlighted that the regulator had previously advised the exchange on resolving the charges against it.

The OFR collaborated with financial regulators from Texas, Maryland, and Michigan in a comprehensive examination of the exchange from October 2022 to March 2023. Following the investigation, the OFR issued a three-count complaint against the exchange platform on April 17. On the same day, the U.S. Securities and Exchange Commission accused Bittrex of violating federal laws related to operating as a securities exchange, broker, and clearing agency.

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Despite the OFR’s suggestion to engage in discussions and explore avenues for settlement, Bittrex expressed disappointment over the enforcement action. The company later surrendered its money transmitter license on April 30 and subsequently filed for bankruptcy in Delaware on May 8.

The allegations against Bittrex highlight the increasing regulatory scrutiny faced by cryptocurrency exchanges and the importance of compliance with state and federal regulations. The case underscores the ongoing efforts of financial regulators to ensure integrity and legal compliance within the cryptocurrency industry.

The exchange is also questioning the SEC‘s (Securities and Exchange Commission) power to regulate its activities based on securities offenses.

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Coinbase filed a motion to dismiss the SEC’s accusations against the company last week. Motivating their stance, the exchange accused the government of overreach, claiming that crypto assets may not even be subject to its jurisdiction.

Bittrex has chosen to follow in the footsteps of Coinbase. While the exchange is in court as a result of bankruptcy processes, the move for dismissal of charges relates to distinct litigation, which was brought soon after the firm chose to depart America. It had already been under investigation since 2017 and had been in futile negotiations with the SEC since 2022 at that time.

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Harold

With a passion for untangling the complexities of the financial world, I've spent over four years in financial journalism, covering everything from traditional equities to the cutting edge of venture capital. "The financial markets are a fascinating puzzle," I often say, "and I love helping people make sense of them." That's what drives me to bring clear and insightful financial journalism to the readers of Coincu.