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

New York and Federal finance regulators have blocked a $1.02 billion transaction by Binance.US to buy the assets of the bankrupt cryptocurrency lender Voyager, claiming in documents on February 22 that it may be discriminatory and illegal.

The action comes in response to the Securities and Exchange Commission’s (SEC) growing involvement in the cryptocurrency space. SEC investigations into possible unregistered security sales recently led Kraken, a cryptocurrency exchange, to halt its staking activities.

Given how the plan envisions paying back Voyager’s former clients, the US-Voyager agreement may also violate the law, the SEC claimed.

According to a filing with the SEC, “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,” citing in particular the VGX token issued by Voyager.

According to the SEC, “it is the Debtors’ burden to show convincing evidence that the provisions of the Plan are practical and do not contravene existing law.” As further evidence that the purchase would become “unfeasible” and “difficult to conclude,” the regulator noted media reports that Binance is preparing to pay fines for prior violations of money laundering and corruption laws.

The New York State Department of Financial Services (NYDFS) and Attorney General Letitia James both opposed the purchase in two documents filed on February 22. The documents included claims that Voyager was unlawfully serving consumers in the state.

Despite the fact that none of the Debtors had New York licenses, the NYDFS filing stated that “one or more of the Debtors may have operated and may be continuing to operate in New York in contravention of Applicable Law.”

According to the lawsuit, Voyager “onboarded New York consumers and… ran a virtual currency business within the state illegally without a license, in violation of New York laws and regulations,” denying its customers of protection. Additionally, according to NYDFS, the scheme discriminates against New Yorkers, who would be unable to retrieve their cryptocurrency for six months while Binance.US receives state clearance.

The SEC made a limited objection to the deal in January, claiming that there wasn’t enough information to demonstrate Binance.

The US could pay for it. Moreover, Voyager, which declared bankruptcy in July, is being investigated by the Federal Trade Commission for misleading marketing.

Voyager has already maintained that the Binance.US deal provides the best result for creditors and that NYDFS complaints are “hypocritical” because the authorities themselves are restricting the availability of cryptocurrencies.

The agreement needed to be approved by Voyager creditors themselves by Wednesday at 16:00 Eastern Time, and according to the company’s legal counsel, with just a few hours remaining to vote, the vast majority had already done so.

 

Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Crypto is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Crypto market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.