Deal Faces Hurdles From SEC and CFIUS
The bankruptcy court overseeing the affairs of insolvent crypto lender Voyager Digital has given initial approval to Binance.US’s plan to purchase the distressed company’s assets.
U.S. bankruptcy judge Michael Wiles permitted Voyager to enter into an asset purchase agreement with Binance.US and to initiate a creditor vote on the sale, Reuters reported on Jan. 10.
Should creditors vote in favor of the deal, a future court hearing could finalize the agreement. Voyager estimates the bid from Binance.US would allow customers to receive 51% of the value of their deposits at the time of its bankruptcy filing.
“Finally, it seems like Voyager customers will get some respite and get a chance to withdraw part of their funds,” Mark Monfort, director at web3 venture firm NotCentralised, told The Defiant.
“Receiving anything in a collapse like this feels generous for any crypto user,” he continued, adding that the markets may interpret the news as a bullish signal.
Voyager filed for bankruptcy in July after Three Arrows Capital, the crypto hedge fund that went bust following Terra’s collapse in May, defaulted on a $650M loan from Voyager. The firm said it held roughly $1.3B worth of cryptocurrency and more than $350M in customers’ cash.
In September, FTX US won an auction for Voyager’s assets with a $1.4B bid, beating out rival exchanges including Binance and CrossTower. However, the spectacular collapse of FTX in November precipitated a second round of bidding, which Binance.US won with a $1.02B bid.
Voyager said the $1B bid was “the fair market value” for its cryptocurrency portfolio plus “additional consideration equal to $20 million of incremental value.”
On Dec. 30, the U.S. Committee on Foreign Investment in the United States (CFIUS) submitted a court filing asserting that its pending review of the proposed transaction could impact the terms of the agreement, the parties ability to complete the requisite transactions, or the timing of the deal’s completion.
On Tuesday, Voyager attorney Joshua Sussberg said Voyager and Binance are working to respond to CFUIS’ concerns and expedite the agency’s review of the deal.
“We are coordinating with Binance and their attorneys to not only deal with that inquiry, but to voluntarily submit an application to move this process along,” Sussberg said.
Sussberg claimed that CFIUS blocking the transaction would force Voyager to repay its users with the crypto it has on hand, resulting in its customers receiving a smaller payout.
On Jan. 4, the U.S. Securities and Exchange Commission also filed formal objections to the proposed deal, arguing that Binance.US has not sufficiently demonstrated that it has the funds required to settle the deal. The SEC added that Binance.US also did not outline how it plans to secure the assets of Voyager customers.
Binance.US, also known as BAM Trading Services, is a California-based centralized cryptocurrency exchange that holds a licensing agreement with Binance, the leading exchange by trading volume.
Binance maintains that Binance.US is entirely independent in its operations.
However, in October 2020, Forbes reported that it had seen an internal Binance document from 2018 outlining plans for a U.S.-based subsidiary intended to draw the attention of regulators away from the international Binance exchange.
In October 2022, a Reuters investigation based on interviews with 30 former Binance employees and a review of thousands of internal company communications dated between 2017 and early 2022 also concluded that Binance.US was created to distract U.S. regulators while operating as a “de facto subsidiary.”
Judge Glenn greenlit the deal despite the SEC’s filing, stating that the commission will have the opportunity to object to the transaction receiving final approval in the future.
Montfort added that Voyager’s bankruptcy proceedings serve as a stark reminder of the benefits of DeFi protocols.
“When loans go bad in DeFi, users are repaid whatever they’re meant to receive per the smart contract code,” he said.
Binance’s BNB token is up nearly 8% in the past week.
BNB Price, Source: The Defiant Terminal