Bittrex’s attempt to return customer funds has met with a significant roadblock from the United States, sparking concerns about the proposed resolution for the crypto exchange’s bankruptcy case.

The firm filed for Chapter 11 bankruptcy protection in Delaware in May, less than a month after the US Securities and Exchange Commission (SEC) charged it with operating an unregistered exchange. Two other divisions – Bittrex Malta Ltd. and Bittrex Malta Holdings Ltd. – also filed for bankruptcy protection in the US Bankruptcy Court for the District of Delaware.

The company’s crypto arm is accused of violating federal laws, including the Bank Secrecy Act, and doing business with foreign nationals in sanctioned nations.

US Government’s Objection Grounds

The US government objecting to Bittrex’s proposal that seeks to compensate the customer is another major blow and is perceived as a coordinated attempt to maim the industry without actually protecting investors.

In fact, the state had been known to crush crypto bankruptcy proposals. As a result of government intervention, Binance.US pulled out of bankrupt crypto lender Voyager Digital’s $1 billion deal to buy its assets, citing an “uncertain regulatory climate.”

The court filing by the government on Wednesday stated,

“The Debtors have not demonstrated why the issues of ownership of cryptocurrency assets need to be determined before the confirmation of the Plan. Finally, siloing creditors into subordinated classes outside of the confirmation hearing is improper. For these reasons, which are discussed more fully below, the Motion must be denied.”

Detailing on the ground of objection, the court filing by the government stated:

• The critical vendor standard does not support the relief sought;
• It is premature;
• It improperly attempts to subordinate creditors outside of a plan

Bittrex’s Bitter End in the United States

Bittrex was once one of the largest exchanges in the US. Prior to sliding into