The United States Department of Justice (DOJ) has filed an objection to a motion by bankrupt cryptocurrency trading platform Bittrex to allow clients to withdraw their crypto and fiat. The US Treasury's Office of Foreign Assets Control (OFAC) is Bittrex's largest creditor, but its claim would be subservient to Bittrex's proposal.
Bittrex was indicted in October by both OFAC and Treasury's Financial Crimes Enforcement Network (FinCEN) for sanctions violations for allowing individuals based in Crimea, Cuba, Iran, Sudan, and Syria to conduct sales transactions from 2014 to 2017. The agencies imposed fines of $24 million and $29 million, respectively.
A Bittrex spokesperson told Cointelegraph at the time that the exchange He was “pleased” to settle the charges. It agreed to pay its $24 million fine to FinCEN, receiving a $5 million credit from FinCEN, while OFAC credited Bittrex $24 million, which remains Bittrex's largest debt.
Related: On Bittrex US Shutdown and SEC Actions: Bittrex Global CEO at Consensus 2023
The crypto platform's problems did not end there. The US Securities and Exchange Commission sued Bittrex for unregistered securities operations in April, and that action could also result in monetary penalties. In May, Bittrex filed for bankruptcy in the US Bankruptcy Court for the District of Delaware. Within days of its bankruptcy filing, Bittrex proposed a plan to make customers complete.
Interesting. number one creditor #Bittrex is OFAC (Office of Foreign Assets Control) responsible for the administration and enforcement of AML (Anti Money Laundering) economic and trade sanctions based on US foreign policy and national security objectives. Now we know why they entered Chapter 11. pic.twitter.com/sAg96t3jv3
—Simon Dixon (@SimonDixonTwitt) May 9, 2023
the Department of Justice argument in its June 7 filing that Bittrex's proposal incorrectly applies the standard that would allow it to pay some creditors before others. The presentation said:
"Fairness and equity demand that if OFAC and FinCEN debts cannot be paid in full through confirmation, the United States should be given the opportunity to demonstrate that the cryptocurrency assets belong to the debtors and can be recovered from customers."
The Justice Department also objected that Bittrex's motion is premature, as the court has yet to confirm Bittrex's bankruptcy. The bankruptcy hearing will be held on June 14.
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