Bittrex to receive 250 BTC loan valued at $7M to commence its bankruptcy case

United States Judge, Brendan Shannon, has approved Bittrex exchange’s request for 250 Bitcoin (BTC) to kickstart the bankruptcy case. Based on the prevailing rates, that much crypto is worth approximately $7 million. The loan comes from Bittrex’s parent company, Aquila Holdings. 

Also Read: Bittrex files for Chapter 11 protection amid US regulatory clampdown; why this could spell doom for Binance.US

Bittrex bankruptcy to proceed without issue

Besides the 250 BTC, Bittrex will also be trying to secure another 450 BTC by requesting an additional loan in a June hearing. Should the current Bitcoin price sustain until the end of June, that loan will be valued at around $12.4 million, bringing the aggregate of the two loans to around $19 billion.  

While Bittrex claims the ability to reimburse all its customers in crypto, the loan will reportedly help the bankruptcy proceed seamlessly.  

Notably, Judge Shannon has approved the Bitcoin loan because of the special characteristics of BTC, including the low-interest rate and protection against volatility. Accordingly, Bittrex will not need to pay back more than 110% of the current value of BTC when the time finally comes for the exchange to start servicing the loan.Citing the Judge:

I am persuaded to accept a novel currency for the loan because it offers favorable terms compared to other bankruptcy loans, including a relatively low 4% interest rate and built-in protections related to bitcoin's price volatility.

Judge Shannon also approved temporary privacy protections, allowing the exchange to leave out customer names from the court documents. Bittrex attorney, Patricia Tomasco, indicated that one large account holder had over $14 million in crypto still on Bittrex's platform, adding that “revealing that customer's name would subject them to a barrage of phishing emails.”

The development comes after Bittrex said it would wind down its operations in the US, citing regulatory constraints. The United States Securities and Exchange Commission (SEC) then charged the exchange and CEO William Shihara on April 17 on allegations that the company operated an unregistered securities exchange.

They [Bittrex and Bittrex Global] operated an unregistered national securities exchange, broker, and clearing agency.

Bittrex Global CEO, Oliver Linch, had said that the exchange would fight the charges in court. Notwithstanding, it has all cumulated to a bankruptcy filing in Delaware, US, on May 8, as reported, with Bittrex saying that its assets and liabilities were each between $500 million and $1 billion and that it owed over 100,000 creditors.

Over the last 24 hours, the exchange has recorded a relatively low trading volume of $7.2 million. This is a fall from grace, considering it was once among the largest crypto exchanges in the US, boasting a market share of approximately 23% in 2018 but has not eclipsed 1% in the last two years.