Bittrex’s bankruptcy case seems to have gotten even more troublesome. The exchange’s filings include $500 million worth of suspicious and potentially fabricated crypto transactions that could change how much creditors and customers ultimately get back, according to a new analysis.
Regulatory researcher Pasha Onur, who reviewed the documents, told DL News: “The particular pattern in the submitted documents immediately raised serious red flags.”
His findings point to tens of thousands of unlikely or repetitive transfers, including transactions that make no economic sense.
Thousands of transactions don’t add up
Onur’s research found that there were over 21,500 withdrawals below Bittrex’s own minimum withdrawal limits. The exchange charged a $35 minimum for withdrawals, plus additional fees, but somehow these small transactions were still processed.
Even more bizarrely, the filing lists over 10,000 identical Bitcoin withdrawals, each in the exact same fraction and all withdrawn on the same day.
DL News also discovered over 200 transactions related to ‘LMC’. This is a token linked to LoMoCoin, a blockchain that ceased operation in 2021, two years before these supposed transactions occurred.
“Analysis of court documents and Bittrex’s hot and cold wallets revealed more than $500 million in fabricated transactions spread across multiple documents and filed in bankruptcy court.” Onuru said.
What it means for customers and creditors
If these transactions are fake or inaccurate, the amount owed by the creditor may be completely ignored. When Bittrex filed for bankruptcy in May 2023, it had approximately 1.6 million users, but fewer than 36,000 (less than 3%) had actually filed claims.
“If a withdrawal transaction is fabricated, the customer’s account balance is incorrect, which means the creditor’s charge is incorrect.” Onur explained. That could delay payments and raise questions about whether some claims were miscalculated all along.
Even the top 20 creditor list used to prioritize payments may be based on incomplete data. Those creditors include the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which is owed $24 million in past sanctions lawsuits.
Patterns of non-compliance
This isn’t the first time Bittrex has run into trouble. Since its founding in 2014, the exchange faced multiple regulatory issues due to weak compliance.
In 2019, New York regulators rejected the company’s license application, citing insufficient anti-money laundering measures and fake account names such as “Elvis Presley” and “Donald Duck.”
In 2022, it was fined $53 million for processing $263 million in illegal trades, and in 2023 it paid $24 million to resolve SEC charges for operating an unregistered securities exchange.
With the bankruptcy filing now complete and creditors still waiting, investigators are under pressure to uncover what really happened inside Bittrex’s books.
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