Voyager Digital Ltd. has been granted court approval to sell itself to Binance.US, the US branch of the world’s largest cryptocurrency exchange, for around $1 billion, following four days of contentious bankruptcy hearings. The decision comes despite opposition from state and federal regulators and a handful of investors.
We are pleased the U.S. Bankruptcy Court for the Southern District of New York agrees with 97% of Voyager customers who voted that our plan provides the best path forward for Voyager users to re-take control of their assets.
— Binance.US 🇺🇸 (@BinanceUS) March 7, 2023
US Bankruptcy Judge Michael Wiles stated that he would grant Voyager permission to proceed with the sale to Binance.US and a related payout plan that could give customers up to 73% of what they are owed, depending on the prices of various cryptocoins in the coming weeks. Wiles dismissed arguments made by lawyers from the US Securities and Exchange Commission (SEC) that certain aspects of the deal and plan violated federal law.
However, according to Peter M. Aronoff, a lawyer with the US Department of Justice, federal officials are considering appealing Wiles’ decision. The SEC and other federal lawyers argued that the payout plan could undermine future efforts to police cryptocurrency markets. They also opposed legal protection usually granted to executives and restructuring advisers of a bankrupt company, which shields them from lawsuits related to implementing a court-approved bankruptcy plan.
During the hearing, Wiles expressed frustration with the SEC and Justice Department, stating that it would be impossible to resolve any bankruptcy case if the people involved could be sued for following an approved plan.
Growing Regulatory Pushback
The dispute reflects a growing conflict between attempts to rehabilitate struggling cryptocurrency companies and increased regulatory scrutiny from the SEC. Voyager now has several weeks to decide whether to complete the sale to Binance.US or liquidate independently and distribute the proceeds to customers.
Before proceeding with the sale, Voyager intends to question Binance.US about ongoing federal investigations, according to Brian Tichenor, Voyager’s lead investment banker at Moelis & Co. The sale to Binance.US would provide customers with approximately $100 million more than if Voyager were to liquidate independently, Tichenor said.