Bittrex crypto exchange has received approval from US Judge Brendan Shannon for a 250 Bitcoin loan to commence bankruptcy proceedings, according to reports. Notably, the BTC loan worth $7 million comes from Aquila Holdings, Bittrex’s parent firm.
Additionally, Bittrex has also hinted that it aims to secure another 450 BTC in a June hearing.
If the current Bitcoin price holds until the end of June, that loan will be worth approximately $12.4 million, bringing the total value of the two loans to approximately $19 billion.
Purpose of the Loan
With these loans, Bittrex will be able to fund its bankruptcy proceedings which include the costs of paying lawyers, accountants, or other professionals, and also pay off any outstanding debts to creditors. It should be noted, however, that these loans would also need to be repaid at a later time, either through the sales of assets or other means.
Approval Prompted by Low-Interest Rate
Remarkably, Judge Shannon cited a low-interest rate of 4%, and protection against volatility as the basis for approving the Bitcoin loan. Markedly, Bittrex will not be paying more than 110% of the current value of BTC when repaying the loan.
In general, Bitcoin loans may have lower interest rates than traditional loans, making them an appealing option for customers seeking more economical finance.
Although the value of Bitcoin can fluctuate, it may nonetheless provide protection against inflation and other economic dangers. In a bankruptcy situation, a Bitcoin loan may be more stable than traditional loans because it is less affected by market movements.
Judge Approves Temporary Privacy Protection
Furthermore, Judge Shannon has approved temporary privacy protections which permit the exchange to withhold customer names from court documents.
Bittrex’s attorney, Patricia Tomasco, has mentioned that one of their large account holders has over $14 million in crypto still stored on Bittrex’s platform. Thus, revealing their name could potentially lead to a flood of phishing emails directed toward them.
Bittrex Faces Financial Difficulties
Bittex’s request for a loan suggests that the exchange is facing financial difficulties and is unable to cover the costs of the bankruptcy proceedings on its own. Notably, the exchange reported a very low 24-hour trading volume of $7.2 million, a remarkably low percentage for a platform that once had a market share of almost 23%.
Meanwhile, Bittrex has announced the closure of its US operations, citing the nation’s opaque regulatory framework and terrible economic conditions. Following the announcement, Bittrex received a Wells notice from the SEC over violations of operating as an exchange, broker-dealer, and clearinghouse without first registering with the regulator.