Desolation Holdings LLC (Bittrex) – Further to $24mn Settlement with SEC, Former Cryptocurrency Exchange Wins Confirmation of Liquidation Plan; General Unsecureds (Including SEC) to Receive 100% Recoveries; Regulatory Clarity, However, Far from 100%

October 31, 2023 – The Court hearing the Desolation Holdings LLC cases issued an order confirming the Debtors' Amended Plan of Liquidation [Docket No. 517].

Confirmation of the liquidation Plan follows a September 9th court order [Docket No. 325] approving a $24.0mn settlement with the SEC further to which, in addition to the payment (treated as a general unsecured claim, which ironically is likely to be paid in full with other GUCs), Debtor Bitrtrex Inc. ("BUS") is "permanently enjoined from violating various provisions of the Exchange Act," ie from, inter alia, "directly or indirectly making use of mails or any means or instrumentality of interstate commerce for the purpose of using any facility to exchange, within or subject to the jurisdiction of the United States, to effect any transaction in a security…"

So are certain cryptocurrencies "securities" to be regulated under the Exchange Act and was BUS illegally operating an unregistered securities exchange?

Those questions are not fully answered (although the SEC's evolving position likely has deterrent value approaching that of regulation/legislation), with the settlement intended to avoid the expensive and uncertain litigation of the issues…and not resolving the issues themselves.

The Debtors' settlement motion notes: "The Debtors certainly admit that litigation is risky, and the outcomes here are uncertain. The uncertainty is heightened in this context, because although the Estimation Motion only seeks to estimate the SEC's ultimate disgorgement remedy, the SEC Action requests that the court make findings that certain cryptocurrencies are securities within the meaning of federal law, a relatively novel question that has been addressed by few courts with divergent outcomes. Absent the Settlement/Consent Judgment, there is a chance that BUS would ultimately be liable for substantially more than the agreed-upon disgorgement, prejudgment interest, and penalty. The Settlement/Consent Judgment eliminates this risk, and accordingly, satisfies this factor.

The Settlement/Consent Judgment liquidates the SEC's claims, avoids the need for lengthy, uncertain, and expensive litigation on multiple fronts, and clears the pathway for the Debtors to promptly propose and seek confirmation of the Plan, which the Debtors anticipate will provide 100% recovery to all customers and general unsecured creditors (including regulatory authorities) holding allowed claims."

At filing, the Debtors, who had otherwise seen increased competition, macro-economic trends and the "crypto winter" combine to result in a 97.4% drop in revenues (2017 to 2022, with revenue largely generated by trading commissions), noted that the SEC's regulatory enforcement action (ie the Wells Notice) is what pushed them over the Chapter 11 precipice.

Throughout (and still), the Debtors note that they have been victimized by lack or regulatory clarity, a clarity which perhaps really only begun to evolve from the collapse of FTX and the radically changed collective view of messiah-turned-devil Sam Bankman-Fried.

At filing, the Debtors noted as to regulatory uncertainty (see in general the Debtors' excellent declaraion in support of first day filings [Docket No. 11] for background): "Despite the growth of the cryptocurrency industry, the U.S. regulators did not clarify which agency serves as the primary regulator for cryptocurrency or whether cryptocurrencies will be considered a commodity, currency, security, or novel asset under the law. Similarly, existing agencies provided little guidance on these issues. The Securities and Exchange Commission ("SEC"), for example, has only issued limited, high-level guidance, including the July 2017 'DAO Report' and the April 2019 staff guidance 'Framework for 'Investment Contract' Analysis of Digital Assets' on the circumstances in which cryptocurrencies would be deemed securities, neither of which provides any concrete guidance as to which specific assets the SEC views to be securities.

Like many U.S.-based cryptocurrency exchanges, the SEC served and, BUS responded to, numerous subpoenas since 2017. The SEC never indicated during its investigation which of the digital assets listed by BUS fit the SEC's definition of securities. Although BUS attempted to cooperate with the SEC, including trying to register BUS with the SEC, the SEC was unable to offer a path forward for BUS to comply with registration requirements for a national securities exchange and still remain in business. On March 9, 2023, the SEC staff served BUS a Wells Notice indicating that the staff intended to recommend the SEC charge BUS with operating an unregistered securities exchange, an unregistered broker dealer, and an unregistered clearing agency….The SEC alleges that six of the crypto assets listed on the Bittrex platform were securities: OMG, DASH, ALGO, TKN, NGC, and IHT. This was the first time in at least 6 years that the SEC disclosed which digital assets listed by BUS it deemed to be securities."

Case Status

On May 8, 2023, Desolation Holdings LLC and three affiliated Debtors (together, "Bittrex" or the "Debtors") filed for Chapter 11 protection noting estimated assets between $500.0mn and $1.0bn; and estimated liabilities between $500.0mn and $1.0bn. At filing, the Debtors, who operate an online multi-cryptocurrency exchange and trading platform, cited the pandemic, the "crypto winter" and increased regulation amongst many factors that contributed to their decision to seek bankruptcy shelter.

On June 7th, the Court issued a final order authorizing the Debtors to access 450 bitcoins ("BTC") in new money, debtor-in-possession ("DIP") financing being provided by Aquila Holdings Inc ("Aquila" or the "DIP Lender," the Debtors' ultimate parent) and continue using cash collateral, with that bitcoin valued at approximately $11.881mn based on June 8th trading price. With a May 10th interim DIP order, the Court had previously allowed the Debtors to access a first 250 BTC tranche (@$6.86mn based on May 11th trading price) of what is in total 700 BTC of DIP financing.

On September 7th the Court issued an order approving the Debtors' entry into a settlement/consent judgment under which they will pay the Securities and Exchange Commission $24.0mn in settlement of the SEC's claims.

Plan Overview

The Debtors' memorandum in support of Plan confirmation (the "Memorandum") [Docket No. 503] states, "The Debtors' chapter 11 cases featured several novel and unprecedented challenges and solutions, including a DIP loan in cryptocurrency, litigation with multiple governmental units and interim withdrawals by customers of cryptocurrencies associated with their accounts.

The Debtors navigated these challenges, in an uncertain regulatory landscape, and proposed a Plan that will provide a 100% distribution to customers and general unsecured creditors. Given the proposed distributions, it is unsurprising but nevertheless requires emphasis that the Plan is almost entirely consensual. No parties have objected to the Plan and it enjoys the support of the vast majority of the Debtors' stakeholders. Indeed, of the creditors that voted, over 92% of BUS' customers, holding over 98.5% of customer claims against BUS, accepted the Plan. The general unsecured creditors that voted unanimously accepted the Plan. The only stakeholders that voted against the Plan were a group of Iranian nationals to whom the Debtors cannot make distributions absent compliance with federal regulations. Yet, the Plan still provides an avenue to make distributions to those intransigent customers, so long as the Debtors can do so in compliance with all applicable statutes and regulations.

The Debtors engaged with the U.S. Trustee, the Department of Justice (the 'DOJ'), the Securities and Exchange Commission (the 'SEC'), the Texas Attorney General's office (the 'Texas AG'), and a number of other parties who submitted objections and comments to the Disclosure Statement and comments to the Plan, in an effort to consensually resolve all of their concerns. The Debtors believe that all such issues have been resolved.

The Plan maximizes the value of the Debtors' assets, enables the expeditious distribution of cryptocurrency to customers, provides for payment in full to general unsecured creditors, effectuates the orderly wind down of the Debtors, and most importantly, complies with all of the requirements of section 1129 of the Bankruptcy Code."

The Disclosure Statement [Docket No. 294] states, "The Plan provides for a wind down of the Debtors and a recovery equal to 100% for any: (a) Administrative Claims; (b) Priority Tax Claim; (c) DIP Loan Claim; (iv) Statutory Fees; and (v) Other Priority Claims.

Holders of Allowed BUS Customer Claims and Allowed Malta OpCo Customer Claims will receive their respective Customer Distribution by having access to the Debtors' platform for withdrawal of 100% of the amount of Cryptocurrencies or fiat currencies associated with such Customer's account as of the Petition Date, provided that (i) Customers will be required to pay any fees charged by third parties in connection with the withdrawal of Cryptocurrencies or fiat currencies; (ii) such Holders provide to the Debtors all required information in order to comply with Governmental Regulations; (iii) the Cryptocurrencies are not Defunct Crypto as of the date of Customer Distribution; (iv) to the extent the Cryptocurrencies are Non-Economic Crypto, such Cryptocurrencies will be aggregated and converted to fiat currency and distributed pro rata to customers in amounts associated with their accounts if their value in the aggregate exceeds the third-party costs associated with their withdrawal; and (v) such Holders accept the 2022 Updated Terms of Service of either BUS or BG, as applicable. With respect to customers of Malta OpCo, they will be asked to sign the BG Terms of Service in order to migrate to the BG platform.

Each Holder of Allowed GUC Claims will receive payment in Cash in an amount equal to such Allowed GUC Claim. Each Holder of an Allowed Subordinated Claim (to the extent that there are any) will receive payment in Cash, after all Allowed GUC Claims have been paid in Cash in full, in an amount equal to such Allowed Subordinated Claim.

On the Effective Date, existing Interests in BUS will survive and continue to exist as Interests in the Wind Down Entity, which entitles each Holder of an Allowed Interest in BUS to a pro rata payment of any remaining Wind-Down Assets (if any) or the proceeds thereof after all Allowed Claims have been paid in full. On the Effective Date, existing Interests in all Debtors, other than BUS, will be deemed canceled, discharged, released and extinguished, and there will be no distribution to Holders of Interests in the Debtors, other than BUS, on account of such Interests. The Wind Down Entity will be managed by the Plan Administrator."

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms not otherwise defined below, are as defined in the Plan and/or Disclosure Statement, also see the Liquidation Analysis below):

* Class 1 ("Other Priority Claims") is unimpaired, deemed to accept and not entitled to vote on the Plan.

* Class 2A ("BUS Customer Claims") is impaired and entitled to vote on the Plan. The estimated recovery is 100%. Each Holder who provides all information that the Debtors believe, in consultation with regulatory counsel, is required by the Debtors, will receive its Customer Distribution, provided that all Government Regulations applicable to such Customer are satisfied prior to making such Customer Distribution.

* Class 2B ("Malta OpCo Customer Claims") is impaired and entitled to vote on the Plan. The estimated recovery is 100%. Each Holder who provides all information that the Debtors believe, in consultation with regulatory counsel, is required by the Debtors, will receive its Customer Distribution, provided that all Government Regulations applicable to such Customer are satisfied prior to making such Customer Distribution.

* Class 3 ("GUC Claims") is impaired and entitled to vote on the Plan. The estimated recovery is 100%. Each Holder will receive payment in Cash in an amount equal to such GUC Claim no later than six months after the Effective Date.

* Class 4 ("Subordinated Claims") is impaired and entitled to vote on the Plan. The estimated recovery is 100%. Each Holder will receive payment in Cash, after all GUC Claims have been paid in Cash in full, in an amount equal to such Subordinated Claim no later than six months after the Effective Date.

* Class 5 ("Interests") is impaired and entitled to vote on the Plan. On the Effective Date, existing Interests in BUS will survive and continue to exist as Interests in the Wind Down Entity, which entitles each Holder of a Class 5 Interest in BUS to a Pro Rata payment of any remaining Wind Down Assets (if any) or the proceeds thereof after all Claims have been paid in full. On the Effective Date, existing Interests in all Debtors, other than BUS, will be deemed canceled, discharged, released and extinguished, and there will be no distribution to Holders of Interests in the Debtors, other than BUS, on account of such Interests.

Definitions

* "Customer Distribution" means the Distribution of like kind Cryptocurrencies to Holders of Customer Claims by providing access to the Debtors' platform for withdrawal of 100% of the amount of Cryptocurrencies associated with such Customer's account as of the Petition Date, provided that Customers will be required to pay any fees charged by third parties in connection with the withdrawal of Cryptocurrencies, provided further that Customer Distribution are subject to Non-Economic Crypto Distributions, provided further that it may not be possible for Customers to successfully withdraw Defunct Crypto. For the avoidance of doubt, Customers who have already withdrawn the full amount of Cryptocurrencies associated with their accounts pursuant to the Customer Withdrawal Order shall not receive an additional Customer Distribution.

* "Wind Down Assets" means all of the Debtors' assets, all of which shall vest in the Wind Down Entity pursuant to this Plan, including the Retained Causes of Action.

* "Wind Down Entity" BUS and any successor thereto on and after the Effective Date, which shall be responsible for winding down the Debtors' Estates pursuant to the terms of this Plan.

Voting Results

On October 27, 2023, the Debtors' claims agent notified the Court of the Plan voting results [Docket No. 500], which were as follows:

* Class 2A ("BUS Customer Claims") 113 claim holders, representing $251,744.74 (98.53%) in amount and 92.62% in number, voted in favor of the Plan. 9 claim holders, representing $3,750.29 (1.47%) in amount and 7.38% in number rejected the Plan.

* Class 2B ("Malta OpCo Customer Claims") 12 claim holders, representing $113,068.95 (15.79%) in amount and 75.00% in number, voted in favor of the Plan. 4 claim holders, representing $603,206.71 (84.21%) in amount and 25.00% in number rejected the Plan.

* Class 3 ("GUC Claims") 3 claim holders, representing $78,763.37 (100.00%) in amount and 100.00% in number, voted in favor of the Plan.

* Class 4 ("Subordinated Claims") There are no creditors in Class 4.

* Class 5 ("Interests") There are no creditors in Class 5.

Key Documents

The Disclosure Statement [Docket No. 294] attaches the following exhibits:

* Exhibit A: Plan (Filed at Docket No. 293)

* Exhibit B: Organizational Chart

* Exhibit C: Liquidation Analysis

On October 17, 2023, the Debtors filed a Plan Supplement [Docket No. 449], which attaches the following exhibits:

* Exhibit A: Assumption Schedule

* Exhibit B: Insurance Policies

* Exhibit C: Identity of Plan Administrator

* Exhibit D: Schedule of Retained Causes of Action

Consent Judgment

As reported previously, on August 21, 2023, the Debtors requested Court approval of a consent judgment under which they will pay the Securities and Exchange Commission $24.0mn in settlement of the SEC's claims [Docket No. 273].

The settlement motion [Docket No. 273] provides, "After months of hard-fought negotiations, BUS and the SEC have reached a compromise of the SEC's claims. Under the parties' settlement, BUS is permanently enjoined from violating various provisions of the Exchange Act, and is jointly and severally liable with Bittrex Global GMBH ('BG') to pay $24 million to the SEC….

As set forth in the Estimation Motion, following years of investigation, in April 2023, the SEC filed a complaint against BUS, BG and William Shihara ('Mr. Shihara') seeking monetary and injunctive relief for alleged violations of the Exchange Act. Upon filing bankruptcy, the Debtors sought to set procedures to estimate the SEC's claims so that they could promptly confirm a plan of liquidation and make distributions to their stakeholders.

The Debtors' initial plan envisioned that certain claims, including those of the SEC, would be subordinated, because it was unclear, due to uncertainty about the size of the SEC's claim, whether there would be sufficient assets to pay the allowed claims of customers and general unsecured creditors before claims that could potentially be penalties.

While the Debtors remain confident in their legal position, all litigation is uncertain, and it is the Debtors' view that the SEC Action raises novel questions about the application of securities laws to cryptocurrencies. Moreover, the Debtors believe that a full resolution of the SEC Action through litigation would expend years of time and costs, and threaten certainty of distribution to customers, general unsecured creditors and interest holders.

The Settlement/Consent Judgment liquidates the SEC's claims, and based on that liquidation, the Debtors believe that there will be sufficient assets to pay all of the allowed claims and general unsecured creditors, without the need to subordinate any claims, thereby avoiding another potential dispute in these cases. Accordingly, the Debtors submit that the Settlement/Consent Judgment is in the best interests of creditors and the estates and respectfully request that the Court approve it."

The motion further states, "Following approval of the Settlement/Consent Judgment, the Debtors intend to file an amended Plan and disclosure statement and seek a prompt confirmation. Based on the liquidation of the SEC's claims as reflected in the Settlement/Consent Judgment, the Debtors believe that there are sufficient assets to pay customers and general unsecured creditors in full, without the subordination of any claims."

Terms of the Consent Judgment

According to the motion, the Consent Judgment:

a. permanently enjoins BUS and Mr. Shihara from directly or indirectly making use of mails or any means or instrumentality of interstate commerce for the purpose of using any facility to exchange, within or subject to the jurisdiction of the United States, to effect any transaction in a security, unless registered as an exchange;

b. permanently enjoins BUS and Mr. Shihara from directly or indirectly operating as a broker or dealer in violation of Section 15(a) of the Exchange Act;

c. permanently enjoins BUS and Mr. Shihara from directly or indirectly operating as a clearing agency in violation of Section 17A of the Exchange Act; and

d. permanently enjoins BG from directly or indirectly making use of mails or any means or instrumentality of interstate commerce for the purpose of using any facility to exchange, within or subject to the jurisdiction of the United States, to effect any transaction in a security, unless registered as an exchange or exempt from registration.

The Consent Judgment also holds BUS and BG jointly and severally liable for disgorgement in the amount of $14.4 million, with $4 million in prejudgment interest, and a civil penalty of $5.6 million, for a total of $24 million, due to the SEC within 60 days after the effective date of the Plan. The SEC will have an allowed general unsecured claim for $24 million in the BUS bankruptcy case.

The SEC will not enforce the Consent Judgment until 90 days after the effective date of the Plan (and only if the Judgment is not paid under the Plan), but if the Plan has not gone effective by March 1, 2024, the SEC may enforce the Consent Judgment against BG anytime thereafter.

Goals of the Chapter 11 Filings

The Hengel Declaration provides, "These chapter 11 cases provide the Debtors with the best opportunity to stabilize their business and to orderly distribute their assets to customers and creditors. The Debtors plan to engage with all constituencies, including the potential official committee of unsecured creditors (which would likely be composed of largely account holders), in a productive dialogue with the hope of building consensus around the Debtors' Plan and, ultimately, a distribution that will maximize recovery for its customers and creditors."

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the "Hengel Declaration"), Evan Hengel, the Debtors' co-chief restructuring officer, detailed the events leading to Bittrex's Chapter 11 filing. The Hengel Declaration provides: "Before the explosion of energy prices and concerns regarding the stability of digital currencies, the market for digital assets had been growing exponentially: Bitcoin's daily exchange volume rose from $92 million in January 2017 to more than $50 billion in May 2021. The initial exchange rate recorded on October 5, 2009, was $0.000764 for every bitcoin; at its all-time high on November 10, 2021, one bitcoin was worth $68,789. The price of bitcoin declined through most of 2022, reaching approximately $16,800 in December 2022.

The beginning of the COVID-19 pandemic introduced instability to both traditional and cryptocurrency markets. Between February 12, 2020 and March 23, 2020, the Dow Jones Industrial Average lost 37 percent of its value and the S&P 500 lost 34 percent of its value. The price of Bitcoin fell over 50 percent over the same time period, and most other cryptocurrencies experienced similar declines. Fears of a devastating pandemic and its effect on the world economy drove many investors to exit the markets. The Debtors, however, continued to operate their cryptocurrency exchange. Customers were able to use the trading platform despite extreme volatility in the markets.

After the pandemic-related markets crash, both traditional and cryptocurrency markets experienced a short recovery followed by a sustained growth period. Central banks and governments, including the United States Federal Reserve, enacted relief programs and adopted quantitative easing monetary policies designed to support the world economies until the end of the COVID-19 pandemic. Such policies contributed to growth in traditional and cryptocurrency markets; subsequently, investment into new projects in the cryptocurrency industry increased rapidly. The price of Bitcoin grew by over 1,000 percent between its lowest point in 2020 and its highest point in 2021. The S&P 500 increased by nearly 100 percent over the same period.

In traditional markets, fears of new variants of the COVID-19 virus and a potential economic contraction chilled equity markets through the end of 2021. In the cryptocurrency space, divestments from risky assets such as technology and early-stage equities led to divestments in the cryptocurrency sector as investors reduced exposure. Increased regulatory scrutiny internationally also contributed to market pessimism, while strong spot trading by institutional investors drove most cryptocurrencies from all-time highs to double-digit losses.

Traditional markets eventually closed 2021 with double-digit growth. Although it seemed like markets were beginning to recover from the COVID-19 pandemic and that its lingering effects would be minimal, as inflation rose, in March 2022 the United States Federal Reserve embarked on a series of interest rate increases to the Federal Funds Rate and fears of a possible 2022 recession began to rise In part due to this quantitative monetary tightening, The S&P 500 declined by 20 percent of its value in the first half of 2022, while the technology-heavy NASDAQ declined by nearly 30 percent over the same period.

Rising inflation and commodity prices contributed to investor pessimism and further divestments. In June 2022, market analysts officially labeled 2022 as a bear market. The net wealth of U.S. households declined by $4 trillion in 2022. After a small recovery, the S&P 500 fell by 396.19 (or 8.78%) in the twelve months ending in April 2023.

Increased Competition

As cryptocurrency gained popularity throughout the late 2010s, new exchanges were launched, and aggressively advertised to gain new customers. These efforts included Super Bowl commercials, sports stadium naming rights, and large budgets to spend on online advertising. In addition, Bittrex's competitors offered 'yield' on crypto holdings to customers who deposited or purchased coins, where they would essentially receive interest payments in cryptocurrency, making them attractive to prospective customers who wanted to increase their financial upside. Like in the traditional banking world, these interest payments were often funded by loaning out the crypto assets to other third parties which is known as 'rehypothetication' and was allowed per their terms of service. As exchanges competed to offer higher yield percentages to customers, the related crypto lending activity increased. BUS never offered yield-based products. This eventually led to the demise of several crypto exchanges in 2022. The emergence of these types of competitors resulted in Bittrex losing market share starting in 2018, as they did not participate in aggressive lending to fund customer yield, nor did they engage in aggressive advertising campaigns.

Crypto Winter and Regulatory Tightening

The widespread selloff in traditional markets was mirrored in the cryptocurrency industry. All major cryptocurrencies experienced significant declines in the first half of 2022; Bitcoin declined 37.3 percent in June 2022 alone and was down 60 percent year-to-date. Companies in the cryptocurrency industry also experienced significant equity declines as declining cryptocurrency prices pressured margins and investor pessimism grew. In June 2022, the aggregate value of the cryptocurrency market dropped below $1 trillion for the first time since January 2021… Since May 2021 to date, the ROI on Bitcoin declined by 51 percent.

Distressed industry participants —Terra and Three Arrows Capital — exacerbated this 'cryptocurrency winter.' The eventual implosion of Terra and Three Arrows Capital, and the resulting fallout, started a downward spiral in the crypto industry… Following the collapse of Luna, on June 12, 2022, Celsius Network, a cryptocurrency lender with over $11 billion of assets under management, announced that it was pausing all account withdrawals and transfers due to extreme market conditions. Celsius's announcement triggered a further decline in the cryptocurrency markets; Bitcoin dropped over thirty percent in value in the following days as investors on other platforms began to liquidate their positions….

The regulators' escalating crackdown on digital currency firms, coupled with cryptocurrency markets' instability and declines, made it very difficult for crypto firms such as the Debtors to operate in the current market and regulatory environment without constant threat of fines and enforcement actions for alleged violations of insufficiently defined standards and regulations.

Though Bittrex rigorously pursued potential restructuring transactions, it became clear that a potential strategic transaction involving its U.S. operations would not materialize. Accordingly, Bittrex began to analyze a potential shut down of its U.S. operations and finalize its contingency preparations process. The Debtors engaged BRG as restructuring advisor to assist the Debtors with their wind down efforts. As a result of these developments, on March 31, 2023, Bittrex released a statement announcing that BUS had made the difficult decision to wind down and close its U.S. operations, effective April 30, 2023. BUS made customer assets available for withdrawal until April 30, 2023. Because Bittrex does not hypothecate or otherwise risk crypto deposited by its customers, BUS easily met all withdrawals and returns of both crypto and fiat deposits submitted prior to the communicated deadline, and plans to continue to do so subject to Court's approval.

Governance Initiatives

On March 1, 2023, the Debtors appointed disinterested director, Timothy Pohl (the 'Disinterested Director'). The Disinterested Director is vested with the authority to, among other things: investigate any historical transactions, including the January 2022 restructuring, or regulatory issues undertaken by the Debtors that the Disinterested Director deems necessary or appropriate, and the facts and circumstances surrounding such transactions… The Disinterested Director will prosecute or settle any and all claims and causes of action arising from the historical transactions that are investigated by the Disinterested Director. In addition to the appointment of the disinterested director, on April 17, 2023, the Debtors also appointed two Co-Chief Restructuring Officers, myself and Robert Duffy."

Prepetition Indebtedness

The Debtors are not obligors on secured debt. Bittrex Inc. ("BUS") is a borrower in an unsecured intercompany loan: on March 30, 2023, BUS entered into a 12-month delayed draw credit agreement for up to $15 million with its ultimate parent, non-debtor Aquila Holdings Inc. (the "Aquila Loan"). As of this filing, $2,000,000 of the Aquila Loan is outstanding.

BUS is also a borrower on a $15 million unsecured delayed draw intercompany loan facility with its non-debtor affiliate, Bittrex Global GmbH (the "BG Loan"), dated September 9, 2022. As of this filing, $15,000,000 of the BG Loan is outstanding.

Liquidation Analysis [see Exhibit C of Docket No. 294 for notes]

About the Debtors

According to the Debtors: "Bittrex, Inc. operates an online multi-cryptocurrency exchange and trading platform."

Aquila Corporate Structure

As of the Petition Date, the Debtors' ultimate parent, Aquila Holdings Inc., has approximately (i) 630,000 shares of Class A Voting Common Stock issued, approximately 33.33 percent of which is held by each of the original founders, Richie Lai, Rami Kawach, and William Shihara, and (ii) 3,780,000 shares of Class B Non-Voting Common Stock issued, approximately 20.15 percent of which is held by Richie Lai, 33.33 percent of which is held by Rami Kawach, and 33.33 percent of which is held by William Shihara, with the balance held by a number of shareholders holding less than five percent of Class B Non-Voting Common Stock each.

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