Binance.US cleared a major hurdle in its effort to acquire the assets of bankrupt crypto lender Voyager Digital in a deal worth over $1 billion after Michael Wiles, a bankruptcy judge in the Southern District of New York, overruled the various objections to the proposed acquisition.
While the judge said he would still work through the confirmation order, he indicated he was in favor of approving the deal. Binance.US may still have to clear certain regulatory hurdles before the deal can be finalized. Voyager's VGX token surged over 8% in the minutes after the ruling.
The plan, assembled after previous bidder FTX itself filed for bankruptcy protection in November, had been supported by 97% of Voyager creditors who responded to the proposal, which could see them recovering nearly three-quarters of their holdings.
The lengthy hearing started with good news for creditors, with Voyager lawyers saying creditors could potentially make a 73% recovery – with a bullish crypto market raising a previous estimate of 51%.
However, regulators from Texas and New Jersey have warned those benefits could be significantly damped if FTX’s Alameda Research succeeds in clawing back $445 million in loan repayments made before its own bankruptcy filing in November.
During day four of the hearing on Tuesday, Judge Wiles ultimately ruled that these regulators' objections did not outweigh the need to proceed with the restructuring of Voyager.
The court heard from a range of witnesses on complex topics such as whether personal data would be handed over to Binance.US under the deal, and why the transfer represented a better deal for creditors than immediate liquidation.
Creditors quizzed Voyager’s financial advisers over points such as how to treat more exotic kinds of crypto assets and how to deal with customers in states such as New York, Texas, Vermont and Hawaii, where regulators don’t let Binance.US operate.
Other obstacles to the deal, mainly placed by wary regulators, appear to have fallen away. Early on in the hearing, Judge Wiles took a dim view of objections from the Securities and Exchange Commission. Earlier court filings suggested Voyager struck a deal with the Federal Trade Commission to avoid interfering with a deceptive marketing probe.
The hearing, which began Thursday, also gave various parties and regulators a chance to object to the proposed sale. The judge ultimately ruled that many of these objections either did not make a strong argument or that they would have unnecessarily bogged down proceedings.
"If the government wants to litigate that" Voyager's sale of VGX tokens was an offering of securities, it should have done so, he said, referring to an SEC attorney's statement that the proposed sale may have securities law tie-ups. However, the regulators did not choose to do so; based on the evidence provided during the hearing, Wiles would have had "no choice" but to rule that the transactions were perfectly legal, he added.
Other concerns raised by parties included the possibility that Voyager customer data, including Social Security numbers, would be shared with Binance.US and may be stored in offshore databases. An attorney representing Binance.US said no Binance.US employees would have access to this type of information.
Jamie Crawley contributed reporting.
UPDATE (March 7, 2023, 22:10 UTC): Adds VGX token surge.
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