Bittrex Faced Enforcement Action From Florida Regulator Ahead of Bankruptcy

The state's financial regulator accused the U.S. firm of violating multiple state laws, and advised the company on how to explore settlement avenues, court filings show.

AccessTimeIconJul 6, 2023 at 8:53 a.m. UTC
Updated Jul 6, 2023 at 9:03 a.m. UTC
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Crypto exchange Bittrex Inc. was accused of violating multiple Florida laws by the U.S. state's financial regulator ahead of the platform's bankruptcy filing in May, court filings from Wednesday show.

The filing by Brandon Greenberg, assistant general counsel to the Florida Office of Financial Regulation (OFR), opposes a request by Bittrex Inc. for Automatic Stay, which would block certain creditors from starting or continuing to taking action against a bankrupt estate. Greenberg states the regulator had advised U.S.-based Bittrex Inc. on exploring avenues for settling charges against it.

The platform was accused – among other things – of failing to segregate customer assets with the company’s operating capital and "failure to maintain a surety bond in the correct amount at all times."

"Deciding which of those violations to charge or not charge in our Administrative Complaint falls squarely within the OFR’s administrative discretion," Greenberg argued in his declaration.

The filing says that between October 2022 and March 2023, the OFR worked with financial regulators from Texas, Maryland and Michigan on a "multistate examination of Bittrex Inc."

On March 31, Bittrex Inc. announced it was winding down its U.S. operations, citing an uncertain "regulatory and economic environment."

Following its investigation, the OFR issued a three-count complaint to the exchange platform on April 17, Greenberg said in Wednesday's filing. On the same day, the U.S. Securities and Exchange Commission accused the firm of violating federal laws by operating a securities exchange, broker and clearing agency. The OFR advised the company to follow administrative procedure if it was interested in "having a more substantive discussion and possibly explore avenues for settlement," the filing said.

According to Greenberg, the exchange later expressed its "disappointment" that the OFR had taken enforcement action instead of letting the company surrender its license and leave Florida. The platform also did not reveal plans for file for bankruptcy at that time, Greenberg said.

While Bittrex Inc. surrendered its money transmitter license on April 30, counsel for the platform also "stridently asserted" that although it "may have had regulatory issues in the past, it had been compliant with Florida law since then."

"In response, I explained how the OFR’s examination findings revealed recent conduct by Bittrex Inc. that violated several provisions of chapter 560, Florida Statutes, which indicated an ongoing pattern of noncompliance with our money services business laws, and that it was within our administrative discretion in deciding which legal violations to charge and not charge in our Administrative Complaint," Greenberg said.

On May 8, the platform filed for bankruptcy in the state of Delaware.

Edited by Parikshit Mishra.


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Sandali Handagama

Sandali Handagama is CoinDesk's deputy managing editor for policy and regulations, EMEA. She does not own any crypto.

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