SEC, NYDFS officially object to Binance-Voyager deal

abdelaziz Fathi

The US Securities and Exchange Commission (SEC) and New York’s financial regulator have objected to Binance’s U.S. affiliate’s proposed purchase of bankrupt crypto lender Voyager Digital’s assets.

In a set of court filings, the federal and state regulators expressed separate concerns 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, alleging “the transactions in crypto assets necessary to effectuate the rebalancing, the redistribution of such assets to Account Holders, may violate the prohibition in Section 5 of the Securities Act of 1933 against the unregistered offer, sale, or delivery after sale of securities.”

NYDFS and New York’s attorney general, Letitia James, also opposed the deal, alleging that Voyager was unlawfully serving customers in the state. They also questioned the purported timeline for customer repayment while Binance.US trying to gain approval in the state, where New Yorkers would have to wait six months to get their assets back.

“Despite the fact that none of the Debtors are licensed in New York, the Department is aware of allegations and other information indicating that one or more of the Debtors may have operated and may be continuing to operate in New York in violation of Applicable Law,” the NYDFS filing said.

The US top regulator filed in January a so-called “limited objection” to the proposed $1.02 billion acquisition, citing the lack of clarity on Binance.US’s ability to close the deal. As such, the SEC wants to get more information on the exchange’s source of funding and the nature of business operations following closure of the deal.

The SEC also wants to know how Binance.US intends to secure customer assets during and after the transaction and how it would rebalance its cryptocurrency portfolio.

Additionally, state securities officials from Texas filed separate objections to the deal. The Texas State Securities Board and the Texas Department of Banking claim that the bankrupt crypto lender and its sole bidder are “not in compliance with Texas law and are not authorized to conduct business in Texas.”

The regulatory objections come amid reports suggesting that the US Committee on Foreign Investment (CFIUS), which reviews deals for potential national security risks, may challenge Binance’s bid to buy Voyager Digital.

According to the United States bankruptcy court filing, Binance’s $1 billion bid could be delayed or blocked while CFIUS analyzing the security risks associated with the takeover. The authority could make it more difficult for the exchange controlled by Chinese-born Changpeng Zhao to buy US assets.

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