The Florida
Office of Financial Regulation (OFR) said it issued a three-count complaint
against Bittrex in late April, days before the troubled cryptocurrency exchange
filed for bankruptcy
protection in May.
OFR said it accused Bittrex of failing to segregate its customer’s assets from
its own operating capital and not maintaining a surety bond in the correct
amount at all times.
Brandom
Greenberg, an Assistant General Counsel at the OFR, disclosed the details in a court declaration filed yesterday (Wednesday)
before the bankruptcy court in the District of Delaware. Greenberg filed the statement in support
of the state regulator’s objection to Bittrex’s motion for automatic stay or the court’s permission to stop creditors from
taking certain actions against its bankrupt estate. According to the court
filing, the
complaint sent to Bittrex was the product of a multi-state investigation that
includes financial regulators from Texas, Maryland and Michigan.
On March
31, Riche Lai, the Co-Founder and CEO of Bittrex announced that the
cryptocurrency exchange had begun winding down its services in the country as “operating in the US is no longer
feasible.” OFR said its received Bittrex’s notice about the move, plus the
exchange’s intention to surrender its license “on or before April 30, 2023.”
Reacting to
OFR’s complaint, Bittrex’s counsel expressed “disappointment” in the
regulator’s decision to take enforcement action rather than let the firm exit the
state. The state agency said it gave Bittrex a May 15 deadline to initiate a
petition for settlement
negotiations. During this period, OFR pointed out, Bittrex did not disclose its financial
condition or bankruptcy plans.
In a
further engagement with Bittrex on June 1, 2023, the exchange’s counsel
‘stridently asserted’ that OFR’s violation claims against the firm were
“older” with no recent violations alleged. The watchdog said the exchange made
the claim despite its
possession of evidence that Bittrex continued to violate Florida
laws “on an ongoing basis.”
“In
response, I [Greenberg] 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…
