On May 8, 2023, online cryptocurrency exchange platform Bittrex, Inc. and three of its affiliated entities (collectively “Bittrex”) filed for chapter 11 to wind down their U.S. and long-dormant Malta operations. The bankruptcy filing followed costly regulatory investigations and an April 17, 2023 SEC enforcement action alleging that Bittrex improperly sold crypto assets that were securities. Unlike other crypto bankruptcies, Bittrex did not risk, hypothecate, or loan cryptocurrencies needed to meet its contractual obligations to its customers. Instead, since March 31, 2023, Bittrex had been urging its 5.4 million customers to withdraw their cryptocurrency deposits. Bittrex’s ultimate goal in its case is to pay all customer’s claims in full as soon as possible.
What is particularly interesting about the Bittrex case is that for the first time, on June 7, 2023, a bankruptcy court authorized a debtor to obtain postpetition financing solely in bitcoin (“BTC”) from the DIP lender.