Voyager Bankruptcy Judge Expresses Skepticism Over U.S. SEC Objection to Binance US Deal

New York Judge Michael Wiles indicated that he couldn't hold up Voyager's bankruptcy restructuring to wait for the regulator to explain its arguments.

AccessTimeIconMar 7, 2023 at 1:20 a.m. UTC
Updated Mar 7, 2023 at 4:12 p.m. UTC

The federal judge overseeing bankrupt crypto lender Voyager Digital's effort to sell itself to Binance.US had some harsh words for a U.S. Securities and Exchange Commission (SEC) attorney over the agency's view that there may be violations of federal law.

SEC senior trial attorney William Uptegrove said Friday that SEC staff believed Binance.US may be operating an unregistered securities exchange in the U.S., an assertion to which Binance.US objected. On Monday, U.S. Bankruptcy Judge Michael Wiles, of New York's Southern District Bankruptcy Court, asked SEC senior trial attorney Therese Scheuer whether Binance.US or Voyager could have known about this claim prior to Friday.

He also indicated the SEC objection may not be enough to warrant a delay in approving the deal.

"Bankruptcy Code doesn't contemplate an endless period of time," the judge said. "Things have to be done. We have creditors who are waiting and who in the midst of all this uncertainty have no access to property in which they've invested in some cases their life savings, so we have to take some kind of action. We have to do something."

The judge said the parties were trying to give the SEC its regulatory freedom "to the extent that it makes sense" but the bankruptcy itself was more urgent. The bankruptcy hearing entered its third day on Monday. While the first two days of the hearing focused on questioning various people tied to Voyager, Binance.US and others involved in the proposed deal, day three was more focused on any objections to the plan itself.

Scheuer objected to some of the disclosures made within the proposal, including a lack of clarity around possible regulatory concerns. The judge appeared to take issue with this point.

"I have no idea how long I can do nothing and wait until Congress and the competing regulatory authority sort out amongst themselves, just who has what authority over what aspects of this, what kind of authority. I have no idea how long that's going to take and we can't do that in bankruptcy," he said. "... [W]e can't just put everything on pause just because we don't know for sure how the regulators will eventually make up their minds on points that they seem to have been debating for years."

Representatives from the U.S. Trustee's office, the Texas Attorney General's office and the New York Department of Financial Services also weighed in during the hearing.

The judge said he may make a decision as soon as Tuesday, when the hearing is set to resume.


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.