Looks like Binance is on the ropes:
SEC Objects to Binance.US’ $1B Voyager Deal, Alleging Sale of Unregistered Securities
Federal and New York regulators object to a billion-dollar deal they say may be unlawful and discriminatory as they examine Voyager's VGX token.
By Jack Schickler
 Feb 23, 2023 at 4:01 a.m. EST
Updated Feb 23, 2023 at 11:49 a.m. EST
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A $1.02 billion deal by Binance.US to purchase assets of defunct crypto lender Voyager Digital has been opposed by New York and federal finance regulators, who said in Feb. 22 filings it could prove discriminatory and unlawful.
The move follows increasing interventions into crypto by the Securities and Exchange Commission, whose probes into the alleged sales of unregistered securities recently caused crypto exchange Kraken to shutter crypto staking operations in the U.S.
Elements of the proposed Binance.US-Voyager deal may also infringe the law, given how the plan envisages repaying Voyager’s former customers, the SEC said.
Under the deal, “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,” a filing by the SEC said, citing in particular the VGX token issued by Voyager.
“It is the Debtors’ burden to present credible evidence that the provisions of the Plan are feasible and not in violation of applicable law,” the SEC said. The regulator also cited media reports that Binance is bracing itself to pay penalties for past infractions of money laundering and corruption law as evidence that the deal could become "unfeasible" and “impossible to consummate."
The deal was also opposed by New York State’s Department of Financial Services (NYDFS) and Attorney General Letitia James in two Feb. 22 filings, including allegations that Voyager was unlawfully serving customers in the state.
“Despite the fact that none of the Debtors are licensed in New York, the Department is aware of allegations and other information indicating that one or more of the Debtors may have operated and may be continuing to operate in New York in violation of Applicable Law,” the NYDFS filing said.
Voyager “onboarded New York customers and thus illegally operated a virtual currency business within the state without a license, in violation of New York laws and regulations,” depriving its customers of protection, the filing added. The plan also discriminates against New Yorkers who won’t be able to reclaim their crypto for six months while Binance.US gains approval in the state, NYDFS said.
In January, the SEC filed a limited objection to the deal, saying there wasn’t enough detail to show Binance.US could afford it. The Federal Trade Commission has also indicated it is probing Voyager, which filed for bankruptcy protection in July, for deceptive marketing.
Voyager had previously argued that the Binance.US deal offers the best possible outcome for creditors, and that NYDFS objections are “ hypocritical” because the regulators themselves are limiting the ability to distribute crypto.
Voyager creditors themselves had until 4 p.m. ET on Wednesday to approve the deal, and the company’s counsel has said that with a few hours of voting left the vast majority had done so.
Read more: SEC Files Limited Objection to Binance.US’ $1B Deal for Voyager Assets
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regulations Voyager Voyager Digital Binance Bankruptcy SEC NYDFS
Jack Schickler
Jack Schickler is a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.
Follow @jackschickler on Twitter
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CRYPTOCURRENCIES
SEC Takes on Binance.US’s Voyager Acquisition in New Front to Crypto RegulationNew York financial regulators are also asking the courts to force Voyager to amend its planned buyout by Binance.US.
By
Kyle Barr
Published2 hours ago
Binance.US is ostensibly separate from the main Binance brand, but recent reports have shown that Binance CEO Changpeng Zhao has used the U.S.-based exchange for funds.Photo: K.unshu (Shutterstock)
The world’s largest crypto exchange Binance is facing intense scrutiny as of late, and the pressure doesn’t seem to be letting up. Through the exchange’s U.S.-based “ partner” Binance.US, the crypto company has been looking to Pac-Man up failed exchange Voyager Digital assets after striking a deal back in December last year. Just a few months later, major regulators are asking the courts to nix that planned buyout, saying it violates securities laws.
In court filings published Wednesday, the Securities and Exchange Commission and the New York State Department of Financial Services both signed objections to Binance’s planned buyout of Voyager, as the company has hobbled along through its Chapter 11 bankruptcy proceedings. The agency asked the New York Southern District Bankruptcy Court to nix the planned purchase.
In its objection to the merger, the SEC wrote that the deal may involve the trade of unregistered securities. Specifically, the agency wrote that Voyager and Binance.US haven’t described whether “third parties, including Binance.US affiliates or foreign persons or entities” will have access to customer wallets. This seems to be inferring that Binance would have access to that former exchange’s customers and their crypto.
The New York financial regulators had similar arguments, saying that Voyager “illegally operated a virtual currency business within the state without a license.” The department further claimed that beleaguered account holders would be even less likely to get their money back since Binance.US still doesn’t have a license to operate in the state. Voyager gets to hold on to users’ crypto for six months after or until the exchange gets approval, according to the buyout, and in that time the regulators argue New York customers will be even more shit out of luck getting their funds back.
Gizmodo reached out to Binance.US and a lawyer representing Voyager for comment but we did not immediately hear back. A few others filed objections to the planned Voyager purchase, including a few Voyager creditors. New York Attorney General Letitia James’ office signed on to the state financial department’s objections.
Both regulatory entities just recently got done sticking it to Binance over Paxos-issued BUSD stablecoin. The SEC had planned to sue Paxos over its stablecoin, and shortly afterwards the New York regulators ordered Paxos to quit minting new wrapped USD coins. Paxos is now in “discussions” with the SEC regarding its stablecoin, according to Reuters. Though it remains unclear what kinds of discussions those may be.
Binance and its CEO Changpeng Zhao have long tried to maintain that Binance.US is an “independent” partner. However, that’s long been in doubt especially since it’s previous CEO Brian Brooks reportedly quit after trying to gain a little more distance between it and its namesake. Last week, Reuters reported that Zhao had secret access to a bank account owned by Binance.US, and had been taking funds out of the account for his own use. Binance.US later confirmed that a Zhao-managed firm had operated on its platform, but claimed it “stopped all activity” in 2021. |
