SEC Fires Warning Shot at Binance By Opposing Voyager Deal

In a move that suggests regulators are increasingly wary of Binance, the U.S. Securities and Exchange Commission said Wednesday that the exchange’s American affiliate should not be allowed to make its $1B purchase of Voyager Digital, the failed crypto lender.

In a submission filed as part of Voyager’s bankruptcy proceedings, the SEC told the court there were insufficient details demonstrating that Binance.US could “consummate” the transaction and secure customer assets. This includes providing safeguards to protect against theft.

The agency also said Voyager has not spelled out how it would rebalance its cryptocurrency portfolio.

“More detail should be provided regarding the implementation of these steps,” the SEC said.

Untoward Dealing

Adam Cochran, senior counsel to Synthetix, said it appears the SEC is trying to block the deal because it is concerned about the integrity of Binance, the No. 1 crypto exchange worldwide. “SEC basically objecting on the grounds that Binance.US couldn’t have this size of assets without some untoward dealing,” Cochran tweeted.

The regulator added that it has communicated its concerns to Voyager’s lawyers and received word that the company will submit a revised disclosure statement with more details. A hearing is scheduled for Thursday.

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The U.S. bankruptcy court overseeing Voyager’s proceedings must approve any deal made between the two firms, after which the proposal will be submitted to Voyager’s creditors for review.

Binance.US, also known as BAM Trading Services, is a California-based centralized cryptocurrency exchange that holds a licensing agreement with Binance, the No. 1 CEX worldwide.

Voyager announced that Binance.US was the top bidder for its assets with a $1.022B offer on Dec. 19. Voyager said the bid was “the fair market value” for its cryptocurrency portfolio plus $20M.

Question of Independence

Voyager filed for bankruptcy in July after Three Arrows Capital defaulted on 15,250 Bitcoin and 350M USDC it borrowed from Voyager in March. The assets were worth $1B at the time. Voyager’s claims against Three Arrows Capital will remain with the company under the deal with Binance.US.

Binance maintains that Binance.US is entirely independent in its operations. However, in October 2020, Forbes reported that it had seen an internal document from Binance dated 2018 that outlined plans for a U.S.-based subsidiary intended to draw the attention of regulators away from its parent company.

In October 2022, Reuters reported that Binance.US was created to distract U.S. regulators while operating as a “de facto subsidiary.”