Binance’s Regulatory Woes Still Threaten To Derail Deal
U.S. bankruptcy judge Michael Wiles has approved Binance.US’s bid to purchase the assets of bankrupt crypto lender Voyager Digital for $1.3B.
Voyager filed for bankruptcy in July after it was brought down by its exposure to failed crypto hedge fund Three Arrows Capital. Binance.US won an auction for the lender’s assets with a $1.02B bid in November after FTX, the original winner, also ended up going bankrupt in spectacular fashion.
Binance.US’s bid would enable 51% of customer funds to be repaid, offering Voyager’s users some form of respite.
But the deal isn’t a sure thing just yet.
While Wiles’ Tuesday verdict allows Voyager to transfer customer accounts to Binance.US, the lender isn’t obligated to go through with the sale.
Voyager’s financial advisers said the company needs four weeks to review Binance.US’s regulatory compliance, its security practices regarding customer assets, and the exchange’s commitment to the deal.
The deal could face additional hurdles from an ongoing investigation by the Committee on Foreign Investment in the United States (CFIUS), which seeks to examine whether Voyager’s proposed restructuring could pose foreign investment or national security risks through Binance.US’s links to the global Binance platform.
Both Binance.US and Binance maintain that the two companies operate as entirely independent entities. 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 regulatory attention away from its parent company.
In October 2022, Reuters similarly reported that Binance.US was created to distract U.S. regulators while operating as a “de facto subsidiary.” Blockchain sleuths also claim to have identified billions of dollars worth of asset flows between the two platforms.
SEC Objection Overruled
Judge Wiles also overruled an objection to the deal filed by the U.S. Securities and Exchange Commission in January.
William Uptegrove, an SEC attorney, told the court that investigators believe Binance.US operates as an unregistered securities exchange during a March 3 hearing.
Judge Wiles characterized the agency’s claims as “vague,” concluding that the SEC failed to present substantial evidence. He also criticized the SEC for expressing its concerns at the eleventh hour.
On Wednesday, Binance added 11 tokens to its unaudited Proof-of-Reserves, bringing the total number of assets recorded in its PoR system to 24. Binance’s Proof-of-Reserves now show $63B in assets as per a snapshot taken on March 1.