Federal judge puts brakes on Voyager sale to Binance
A federal judge temporarily halted the proposed deal to sell bankrupt crypto lender Voyager Digital’s assets to Binance US after a request by the United States government for an emergency stay.
The US Attorney’s Office for the Southern District of New York and the Department of Justice’s (DOJ) bankruptcy watchdog filed appeals against the sale that was previously approved by a bankruptcy judge. The request for an emergency stay was made on the grounds that the transaction could stamp crypto tokens that might be unregistered securities, as well as transactions that violate federal securities laws.
Practically, the decision pauses the sale process until the Department of Justice pursues appeals that challenge the legality of the deal through the US court system.
Despite federal and state regulators’ objection, Judge Michael Wiles approved the proposed restructuring plan earlier this month. The winning bidder will make a $10 million in “good faith deposit” and will reimburse Voyager for certain expenses up to a maximum of $15 million. Binance.US has until April 18, 2023 to finalize the acquisition, otherwise Voyager will move these additional fees to customers after a one-month extension.
TSX-listed Voyager Digital filed for Chapter 11 bankruptcy in 2022 following the crash of major crypto tokens TerraUSD and Luna. The company, which counts more than 100,000 creditors and billions of dollars in liabilities, was caught out by the collapse of crypto hedge fund Three Arrows Capital, suffering losses of more than $650 million.
The Toronto-based firm had around 100,000 creditors and between $1 billion to $10 billion in assets. The majority of Voyager’s creditors also voted to opt their claims into a “wind-down entity,” with 65% of Class 3 Ballots and 85% of “holders of claims or interests in the non-voting classes” voted to opt in.
Despite this progress, US federal and state regulators have objected to Binance’s proposed purchase of Voyager Digital’s assets on the grounds that it may violate the country’s securities laws and registration rules.
The SEC warned that distributing Voyager’s VGX token as part of Binance US’s rescue plan may constitute the sale of an unregistered security. The agency also said the bidder could be an unregistered national securities exchange.
NYDFS and New York’s attorney general, Letitia James, also opposed the deal, alleging that Voyager was unlawfully serving customers in the state. They questioned the purported timeline for customer repayment while Binance.US is trying to gain approval in the state, where New Yorkers would have to wait six months to get their assets back.
