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The U.S. Department of Justice (DOJ) has filed an objection to a petition filed by bankrupt cryptocurrency trading platform Bittrex, which allows customers to withdraw their crypto and fiat. The US Treasury Department’s Office of Foreign Assets Control (OFAC) is Bittrex’s largest creditor, but its claim will be subject to Bittrex’s offer.
In October, OFAC and the U.S. Department of the Treasury Financial Crime Enforcement Network (FinCEN) accused Bittrex of violating sanctions for allowing individuals based in Crimea, Cuba, Iran, Sudan, and Syria to conduct put transactions from 2014 to 2017. The agencies estimated the fines at $24. million and $29 million, respectively.
A spokesperson for Bittrex told Cointelegraph at the time that the exchange was “glad” to drop the charges. It agreed to pay a $24 million fine to FinCEN, receiving a $5 million loan from FinCEN, while OFAC lent Bittrex $24 million, which remains Bittrex’s largest debt.
Related: On US Bittrex Shutdown and SEC Action – Bittrex Global CEO at Consensus 2023
The problems of the cryptocurrency platform did not end there. The US Securities and Exchange Commission sued Bittrex for unregistered securities trading in April, an action that could also result in monetary penalties. In May, Bittrex filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. A few days after filing for bankruptcy, Bittrex proposed a plan to save customers.
interesting. Number One creditor for #Bittrex is OFAC (Office of Foreign Assets Control) responsible for AML (Anti Money Laundering) admin & enforcer of economic & trade sanctions based on US foreign policy & national security goals. Now we know why they went into Chapter 11. pic.twitter.com/sAg96t3jv3
— Simon Dixon (@SimonDixonTwitt) May 9, 2023
The Justice Department said in a June 7 filing that Bittrex’s proposal improperly enforces a standard that would allow it to pay some creditors ahead of others. The statement said:
“Fairness and impartiality require that if OFAC and FinCEN debts cannot be paid in full by confirmation, the United States should have a chance to prove that crypto assets belong to the Debtors and can be seized from customers.”
The Justice Department also countered that Bittrex’s petition is premature as Bittrex’s bankruptcy has yet to be confirmed by a court. The bankruptcy hearing will take place on June 14.