U.S. Court Allows Acquisition of Voyager Digital Assets by Binance.US

By: Michael Wilson

March 8, 2023 6:16 AM

Despite objections from the US Securities and Exchange Commission and state regulators, the bankruptcy court in the Voyager Digital case approved the sale with Binance.US.

Binance.US has cleared a serious barrier in its attempt to purchase the assets of insolvent crypto lender Voyager Digital in a $1 billion transaction after Michael Wiles, a bankruptcy judge in the Southern District of New York, disregarded several objections to the proposed acquisition.

While the judge stated that he would continue to work on the confirmation order, he suggested that he was in favor of sanctioning the sale. Binance. Before the transaction can be consummated, the US may need to pass several regulatory hurdles. The VGX token of Voyager increased by more than 8% in the minutes following the verdict.

The offer, put together after previous bidder FTX filed for bankruptcy in November, was endorsed by 97% of Voyager creditors who reacted to the proposal, which could see them recover roughly three-quarters of their assets.

The lengthy session began with excellent news for creditors, with Voyager attorneys estimating that creditors may recover 73% of their losses, up from 51% previously.

Nevertheless, Texas and New Jersey officials have cautioned that those benefits might be severely reduced if FTX's Alameda Research is successful in recouping $445 million in loan repayments made before to its own bankruptcy filing in November.

On the fourth day of the hearing on Tuesday, Judge Wiles concluded that the regulators' objections did not outweigh the need to proceed with the Voyager restructuring.

The court heard from a variety of witnesses on difficult issues such as whether personal data will be transferred to Binance.US as part of the arrangement, and why the transfer was a better bargain for creditors than instant liquidation.

Creditors grilled Voyager's financial advisers on issues such as how to handle increasingly unusual types of crypto assets and how to deal with customers in jurisdictions such as New York, Texas, Vermont, and Hawaii, where regulators prohibit Binance.US from operating.

Additional roadblocks to the acquisition, mostly erected by skeptical regulators, appear to have been removed. Early in the hearing, Judge Wiles dismissed the Securities and Exchange Commission's arguments. Previous court documents indicated that Voyager reached an agreement with the Federal Trade Commission to avoid interfering with a deceptive marketing investigation.

The hearing, which began Thursday, also allowed numerous parties and authorities an opportunity to oppose to the proposed transaction. The judge eventually determined that many of these objections either did not make a compelling point or would have unnecessarily slowed proceedings.

"If the government wants to litigate that," Voyager's sale of VGX tokens was an offering of securities, he added, referring to an SEC attorney's statement that the intended sale may have securities law implications. But, the authorities did not chose to do so; Wiles would have had "no choice" but to rule that the transactions were completely legal based on the facts presented during the hearing, he continued.

Several parties expressed worry that Voyager consumer data, including Social Security numbers, will be shared with Binance.US and held in offshore systems. According to an attorney for Binance.US, no Binance.US workers would have access to this type of information.