Binance US recently agreed to purchase assets
from Voyager Digital, a defunct cryptocurrency lender, for $1.02 billion. However, this deal has been opposed by the United States Securities and Exchange Commission (SEC) as well as New York regulators, who have alleged that the deal may be unlawful and discriminatory. Specifically, the SEC has expressed concern that certain aspects of the asset restructuring plan proposed by Binance US could potentially violate securities law.
The SEC has launched a formal investigation into Binance US and related debtors to determine whether they violated any anti-fraud, registration, or other provisions of federal securities law. In particular, the SEC has expressed concern about the security of assets through the planned acquisition, arguing that the information provided in the planned purchase of Voyager assets fails to adequately outline the measures that the crypto exchange will take to ensure that customer assets are safe and not transferred off the platform.
In a filing
submitted to the US Bankruptcy Court for the Southern District of New York, the SEC has argued that some elements of the Binance US - Voyager deal may infringe securities law, citing the VGX token issued by Voyager in particular. According to the regulator, the transactions in crypto assets necessary to effectuate the rebalancing and redistribution of such assets to account holders may violate the prohibition in Section 5 of the Securities Act of 1933 which protects against any unregistered offerings, sales, or delivery after the sale of securities.
Furthermore, the SEC has also expressed concern that the deal could easily become "unfeasible" and "impossible to consummate" due to media reports that Binance is preparing to pay penalties for past violations of money laundering and corruption law. Meanwhile, the New York State Department of Financial Services (NYDFS) and Attorney General Letitia James have also filed objections to the deal, citing allegations that Voyager operated illegally within the state of New York without a license.
The NYDFS has argued that the plan discriminates against New Yorkers, who will not be able to reclaim their cryptocurrency for six months while Binance US gains approval in the state. Additionally it also pointed out that the crypto lending platform onboarded New York customers and thus illegally operated a digital currency business within the state, and the violation of New York laws and regulations deprives its customers of protection.
Although Voyager creditors had until March 2 to approve the deal, the vast majority had reportedly done so with a few hours left for voting. However, the SEC's opposition to the deal could potentially cause further delays or even derail the acquisition altogether.
The SEC's scrutiny of the digital asset industry has increased in recent months, with its probes into the alleged sales of unregistered securities leading crypto exchange Kraken to shutter its staking operations
in the US. The Federal Trade Commission has also indicated that it is investigating Voyager for deceptive marketing. The ongoing regulatory scrutiny of the cryptocurrency industry is likely to continue in the coming months, with the outcome of the Binance US - Voyager deal likely to be closely watched by market participants.