U.S. Government Demands Halt to Voyager-Binance.US' $1 Billion Deal – Here's Why
Plans by Binance.US to acquire the assets of Voyager Digital, a collapsed cryptocurrency brokerage, have hit a snag following a demand by the US government to put the proposed deal on hold.
According to court filings, both the Securities and Exchange Commission (SEC) and New York's financial regulator have raised objections to the $1 billion transaction, citing multiple concerns.
The SEC said the Voyager deal might violate laws on the unregistered offer and sale of securities.
More specifically, the agency said the transactions in crypto assets necessary to effectuate the rebalancing "may violate the prohibition in Section 5 of the Securities Act of 1933 against the unregistered offer, sale, or delivery after sale of securities."
The SEC's objection also cited reports of U.S. investigations into Binance.US and the global Binance crypto exchange, of which Binance.US is a purportedly independent partner. "Regulatory actions" could mean the deal may become "impossible to consummate," it said.
Similarly, New York's top financial regulator and New York Attorney General Letitia James objected to the deal, saying that Voyager "illegally operated a virtual currency business within the state without a license."
The regulator also mentioned that since Binance.US isn’t licensed or available in New York, Voyager customers based in the state may have to wait as much as six months to gain access to their funds.
“New York Account Holders will have no ability to control the assets in their accounts, including whether to sell the cryptocurrency to avoid further risk in the volatile cryptocurrency market,” the NYDFS said, adding:
“In contrast, Account Holders in jurisdictions other than Unsupported Jurisdictions (‘Supported Jurisdictions’) will have the freedom to trade the cryptocurrency owed to them, defined as ‘Net Owed Coins’ in the APA, once their Binance US accounts are set up and their assets are migrated.”
Meanwhile, US Bankruptcy Judge Michael Wiles, who initially approved the deal last week, will hold a hearing tomorrow regarding the new objections by the SEC and New York's top regulator.
“The Court cannot tell the Government to speak now or forever hold its peace before Voyager and Binance.US wed,” Judge Williams said in a recent filing. “Nothing in the Bankruptcy Code permits courts to exculpate parties from liability to the Government for past and future conduct.”
The Binance.US' proposed $1 billion deal to buy Voyager will allow customers to finally be able to make withdrawals, with estimates that users could recover 73% of the value of their deposits.
Notably, Voyager is not obligated to accept the exchange's offer. It will take up to a month for the company to review "new questions" about Binance.US's commitment to the acquisition, its regulatory compliance, and the security of customer deposits, said the report, citing Voyager's financial advisors.
Voyager was a cryptocurrency broker that filed for Chapter 11 Bankruptcy in July, which was followed by a bidding war between Binance and the FTX exchange. At the end of October, FTX secured the approval of a US bankruptcy court to take over Voyager’s assets, but it infamously collapsed soon after, and Binance was back in the game.