According to court filings, cryptocurrency exchange, Bittrex, has been accused by Florida’s financial regulator of violating several laws within the state. These violations allegedly occurred prior to Bittrex Inc. filing for Chapter 11 in May.
Bittrex had made a request for an Automatic Stay, which would impede certain creditors from pursuing or continuing legal actions against a bankrupt estate. In response, Brandon Greenberg, Assistant General Counsel to the Florida Office of Financial Regulation (OFR), filed a statement opposing the request.
The purpose of Greenberg’s filing is to challenge the implementation of the Automatic Stay. This would allow creditors to proceed with their actions against Bittrex Inc. as part of the bankruptcy proceedings.
Greenberg highlighted in his statement that the financial regulator, the Florida Office of Financial Regulation (OFR), had already provided guidance and advice to Bittrex, regarding potential avenues for resolving the charges brought against them.
Accusations Against Bittrex: What Led To The Regulatory Uproar?
Bittrex Inc. faces several accusations which included the failure to separate customer assets from the company’s own capital. Not only that, the exchange, was also accused of inconsistent maintenance of an adequate surety bond.
According to the filing, from October 2022 to March 2023, the OFR collaborated with financial regulators in Texas, Maryland, and Michigan to conduct a “multistate examination” of Bittrex Inc.
This suggests that the regulators from multiple states worked together to assess and investigate the operations of Bittrex Inc. during that period before coming to their present conclusion.
After conducting its investigation, the OFR filed a three-count complaint against the exchange platform on April 17, as stated by Greenberg in the filing on Wednesday.
On the same day, the U.S. Securities and Exchange Commission (SEC) accused the company of violating federal laws by operating as a securities exchange, broker, and clearing agency.
The OFR previously advised the company to engage in administrative procedures. It was suggested in order to help Bittrex to pursue a more substantive discussion and potentially explore options for a settlement.
In his filing, Greenberg asserted that the Florida Office of Financial Regulation holds the authority to exercise administrative discretion. It can determine which violations to charge in their Administrative Complaint against the platform.
Bittrex Ceased Operations Amidst “Uncertain Regulatory and Economic Environment”
On March 31, Bittrex Inc. made an announcement stating its intention to wind down its operations in the United States. It cited concerns over the uncertain regulatory and economic environment.
According to Greenberg, the company expressed disappointment with the enforcement action taken by the OFR back in April as they had hoped to surrender their license and exit Florida without such action.
At that time, Bittrex Inc. did not disclose any plans to file for bankruptcy. However, on April 30, the company surrendered its money transmitter license.
Legal representatives for the exchange have combated the allegations. They said that although Bittrex may have faced regulatory issues in the past, they had been in compliance with Florida law since then. On May 8, Bittrex Inc. filed Chapter 11 in the state of Delaware.