$500M in Fake Transactions? Bittrex Bankruptcy Records Raise Major Red Flags

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Bittrex’s bankruptcy case seems to have got messier. A new analysis claims the exchange’s filings include over $500 million worth of suspicious and possibly fabricated crypto transactions and that could change how much creditors and customers eventually get back.

His findings point to tens of thousands of unlikely or repetitive transfers, including transactions that don’t make economic sense.

Thousands of Transactions Don’t Add Up

Onur’s review found more than 21,500 withdrawals that were below Bittrex’s own minimum withdrawal limit. The exchange charged a $35 minimum for withdrawals and added extra fees on top, yet somehow, these smaller transactions were still processed.

Even stranger, the filings show over 10,000 identical Bitcoin withdrawals – each for the exact same fractional amount, all on the same day. 

DL News also found over 200 transactions tied to “LMC”, a token linked to LoMoCoin – a blockchain that stopped operating in 2021, two years before these supposed transactions happened.

What It Means for Customers and Creditors

If these transactions are fake or inaccurate, they could completely throw off how much money creditors are owed. Bittrex had about 1.6 million users when it filed for bankruptcy in May 2023 but fewer than 36,000 (less than 3%) actually submitted claims.

“If withdrawal transactions are fabricated, customer account balances are wrong, meaning creditor claim amounts are incorrect,” Onur explained. That could delay payouts and raise questions about whether some claims were miscalculated from the start.

Even the top 20 creditors list, used to determine payment priority, might be based on faulty data. Among those creditors is the U.S. Treasury’s Office of Foreign Assets Control (OFAC), owed $24 million from an old sanctions case.

A Pattern of Compliance Failures

This isn’t the first time Bittrex has run into trouble. Since launching in 2014, the exchange faced multiple regulatory issues for weak compliance practices.

In 2019, New York regulators rejected its license application, citing poor anti-money laundering controls and fake account names like “Elvis Presley” and “Donald Duck.” 

In 2022, it was fined $53 million for processing $263 million in illegal transactions, and in 2023, it paid $24 million to settle SEC charges for operating an unregistered securities exchange.

With bankruptcy claims now closed and creditors still waiting, investigators are under pressure to find out what really happened inside Bittrex’s books.