Bittrex gets court approval to access 250 Bitcoin DIP financing

By Sarah Lizee

Olympia, Wash., May 10 – Desolation Holdings LLC, which does business as Bittrex, gained approval to access 250 Bitcoin under a proposed 700 Bitcoin debtor-in-possession facility, according to an interim order filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the financing it being provided by parent company Aquila Holdings Inc.

The proceeds will be used for the payment of wind-down expenses, working capital expenses and other general corporate purposes.

In exchange, the DIP lender will be given super-priority administrative expense claims under the plan.

“Although novel to those outside of the cryptocurrency industry, borrowing funds in BTC is not uncommon for participants in the cryptocurrency industry, as BTC is that industry's currency of choice,” the company said in the DIP motion.

“Following the closure of the debtors’ U.S. dollar fiat banking services provider, Silvergate Bank, access to fiat currency for a cryptocurrency company in wind-down mode is unlikely.”

Bittrex said that while the debtors discussed with the DIP lender whether it would make the loan in dollars, the DIP lender was unwilling to do so due to potential negative tax consequences to the lender, which would have greatly increased the expense of lending and for which the debtors would have been charged.

In order to prevent negative tax consequences, the DIP lender also requires the principal amount of the DIP loan to be repaid in Bitcoin.

Bittrex said the debtors negotiated protection against the risk of currency rate fluctuations between the time the loan is borrowed and repaid.

Following both the interim draw and final draw, the debtors intend to convert the Bitcoin into dollars in order to minimize any risks of currency rate fluctuation.

Bitcoin closed at $27,647.20 on Tuesday.

After the conversion, the debtors will use those proceeds to pay their administrative expenses in the Chapter 11 cases, including professional fees and employee costs, among other things.

Bittrex is a cryptocurrency trading platform with headquarters in Seattle. The company filed bankruptcy on May 8 under Chapter 11 case number 23-10597.

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