Key facts
- The SEC is opposing Bittrex's bankruptcy administrator's request to overturn a $24 million judgment.
- Bittrex seeks to have the August 2023 judgment, including $14.4M in disgorgement, $4M in interest, and a $5.6M fine, overturned.
- The administrator argues that changed circumstances, including the SEC's evolving stance on crypto, make the original order inequitable.
- The SEC contends that circumstances have not changed significantly and settlements cannot overturn enforcement actions.
- Bittrex reportedly profited approximately $1.3 billion from U.S. investors while operating unregistered.
- The U.S. Treasury's $24.28 million sanctions settlement makes it the largest unsecured creditor.
The U.S. Securities and Exchange Commission (SEC) is formally opposing a request from the bankruptcy administrator of the defunct crypto exchange Bittrex to overturn a $24 million judgment. This judgment, finalized in August 2023, includes $14.4 million in disgorgement, $4 million in prejudgment interest, and a $5.6 million civil fine. The Bittrex bankruptcy estate argues that changed circumstances, particularly the SEC's evolving stance on crypto regulation and its actions against other exchanges, render the original penalty inequitable.
The SEC, however, maintains that the circumstances have not changed significantly enough to warrant overturning the settlement and that such agreements cannot nullify prior enforcement actions. The regulator asserts that Bittrex profited approximately $1.3 billion from U.S. investors while operating without proper registration. Adding to the complexity, the U.S. Treasury's $24.28 million sanctions settlement positions it as the largest unsecured creditor in Bittrex's Chapter 11 bankruptcy, which began in May 2023 with over 100,000 creditors.
This legal battle highlights a central tension in bankruptcy proceedings involving crypto firms: when limited assets must be distributed, the priority of claims between regulatory penalties and the claims of former customers becomes critical. The SEC's insistence on preserving its penalty could reduce the funds available for distribution to unsecured creditors, including retail users, raising questions about whether the regulator's actions ultimately serve the interests of the consumers crypto regulation aims to protect. A Delaware court ruling in February 2024 did allow for some crypto holdings to be returned to customers, but broader claims continue to compete for the remaining estate value.