SEC Objects to Binance.US’ $1B Voyager Deal, Alleging Sale of Unregistered Securities

Federal and New York regulators object to a billion-dollar deal they say may be unlawful and discriminatory as they examine Voyager's VGX token.

AccessTimeIconFeb 23, 2023 at 9:01 a.m. UTC
Updated Feb 23, 2023 at 7:32 p.m. UTC
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A $1.02 billion deal by Binance.US to purchase assets of defunct crypto lender Voyager Digital has been opposed by New York and federal finance regulators, who said in Feb. 22 filings it could prove discriminatory and unlawful.

The move follows increasing interventions into crypto by the Securities and Exchange Commission, whose probes into the alleged sales of unregistered securities recently caused crypto exchange Kraken to shutter crypto staking operations in the U.S.

Elements of the proposed Binance.US-Voyager deal may also infringe the law, given how the plan envisages repaying Voyager’s former customers, the SEC said.

Under the deal, “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,” a filing by the SEC said, citing in particular the VGX token issued by Voyager.

“It is the Debtors’ burden to present credible evidence that the provisions of the Plan are feasible and not in violation of applicable law,” the SEC said. The regulator also cited media reports that Binance is bracing itself to pay penalties for past infractions of money laundering and corruption law as evidence that the deal could become "unfeasible" and “impossible to consummate."

The deal was also opposed by New York State’s Department of Financial Services (NYDFS) and Attorney General Letitia James in two Feb. 22 filings, including allegations that Voyager was unlawfully serving customers in the state.

“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.

Voyager “onboarded New York customers and thus illegally operated a virtual currency business within the state without a license, in violation of New York laws and regulations,” depriving its customers of protection, the filing added. The plan also discriminates against New Yorkers who won’t be able to reclaim their crypto for six months while Binance.US gains approval in the state, NYDFS said.

In January, the SEC filed a limited objection to the deal, saying there wasn’t enough detail to show Binance.US could afford it. The Federal Trade Commission has also indicated it is probing Voyager, which filed for bankruptcy protection in July, for deceptive marketing.

Voyager had previously argued that the Binance.US deal offers the best possible outcome for creditors, and that NYDFS objections are “hypocritical” because the regulators themselves are limiting the ability to distribute crypto.

Voyager creditors themselves had until 4 p.m. ET on Wednesday to approve the deal, and the company’s counsel has said that with a few hours of voting left the vast majority had done so.


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Jack Schickler

Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.

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