$500M in Fake Transactions? Bittrex Bankruptcy Records Raise Major Red Flags
A new analysis claims that the crypto exchange Bittrex’s bankruptcy filings include over $500 million worth of suspicious and possibly fabricated transactions. These findings could significantly impact how much creditors and customers eventually recover.
Regulatory researcher Pasha Onur, who reviewed the bankruptcy documents, told DL News, “Certain patterns in the filed documents immediately raised serious red flags.” His investigation uncovered tens of thousands of unlikely or repetitive transfers, including transactions that do not 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 more peculiar, the filings show over 10,000 identical Bitcoin withdrawals, each for the exact same fractional amount, all occurring on the same day. DL News also identified over 200 transactions linked to “LMC,” a token related to LoMoCoin — a blockchain that ceased operations in 2021, two years before these supposed transactions took place.
“Our analysis of court documents and Bittrex hot and cold wallets reveals over $500 million in fabricated transactions filed with the bankruptcy court across multiple dockets,” Onur said.
What It Means for Customers and Creditors
If these transactions are fabricated or inaccurate, they could completely distort how much money creditors are owed. Bittrex had about 1.6 million users at the time of its bankruptcy filing 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. This discrepancy might delay payouts and raise doubts about whether some claims were miscalculated from the start.
Even the top 20 creditors list, which determines payment priority, might be based on faulty data. Among those creditors is the U.S. Treasury’s Office of Foreign Assets Control (OFAC), which is owed $24 million from an old sanctions case.
A Pattern of Compliance Failures
This is not the first time Bittrex has faced regulatory troubles. Since its launch in 2014, the exchange has encountered multiple compliance issues.
In 2019, New York regulators rejected Bittrex’s license application, citing inadequate anti-money laundering controls and the existence of fake account names such as “Elvis Presley” and “Donald Duck.” In 2022, it was fined $53 million for processing $263 million worth of illegal transactions. Then, in 2023, Bittrex paid $24 million to settle SEC charges for operating an unregistered securities exchange.
With bankruptcy claims now closed and creditors still awaiting payment, investigators face mounting pressure to uncover what truly happened within Bittrex’s books.