TL;DR
- US Securities and Exchange Commission (SEC) raised an objection to the restructuring plan of bankrupt Voyager Digital on 7th March.
- Judge Michael Wiles gave the SEC until the following day to present a more convincing argument. Voyager’s restructuring plan includes the sale of its distressed assets to Binance US, which will return the money to the company’s customers.
- The SEC wants to maintain the right to hold Voyager liable as it believes Voyager’s VGX token could be a security.
- The SEC argues that transactions to return assets to US customers may violate its rules against the sale of unregistered securities, making Binance US an unregistered securities exchange. Texas regulators have also raised concerns about Voyager’s restructuring plan.
SEC’s Objection
The US Securities and Exchange Commission (SEC) raised an objection to the restructuring plan of bankrupt crypto broker Voyager Digital on 7th March. The SEC argued that transactions to return assets to US customers may violate its rules against the sale of unregistered securities, making Binance US an unregistered securities exchange. Voyager Digital has a pending deal to sell its distressed assets to Binance US, which will handle returning money to the company’s customers. The SEC wants to maintain the right to hold Voyager liable as it believes Voyager’s VGX token could be a security.
Judge Michael Wiles
During a court hearing on Monday regarding Voyager Digital’s bankruptcy proceedings, Judge Wiles criticized the SEC’s objection to Voyager’s restructuring plan. He stated that without certain protections for the “persons” involved in the plan, there would be “a sword hanging over the heads of anybody who’s going to do this transaction.” In other words, Judge Wiles is suggesting that the SEC’s objection is not persuasive and that it fails to provide adequate protection for the individuals involved in the restructuring plan.
Judge Wiles was originally set to issue a decision on Voyager’s plan last week, but he has since given the SEC until tomorrow morning to come up with a more convincing argument against the plan. This suggests that Judge Wiles is taking the objections seriously and is giving the SEC an opportunity to make a stronger case against the plan.
It’s worth noting that Judge Wiles is not the first government official to scrutinize Voyager’s restructuring plan. The U.S. Attorney for the Southern District of New York, Damian Williams, has called the plan “blatantly illegal” and the state securities regulator in New Jersey has supported Williams’s objection. Additionally, the securities and banking regulators in Texas have taken issue with Voyager’s lack of transparency in informing unsecured creditors that their payout could drop from an estimated 51% to 24% of the value of their assets if the company doesn’t win its lawsuit against Alameda Research.
Despite these objections, Voyager has a pending deal to sell its distressed assets to Binance US, which will then handle returning money to the company’s customers. The SEC’s objection to the plan is focused on the legal protections that Voyager is seeking for its advisors and executives, which the SEC argues are too broad and could prevent the commission from holding the company liable for past or future violations of the law.
Overall, Judge Wiles’s criticism of the SEC’s objection suggests that he is taking a measured approach to the case and is willing to listen to both sides before making a decision. It remains to be seen whether the SEC will be able to provide a more convincing argument against Voyager’s restructuring plan by tomorrow morning.
Other Regulatory Concerns
The SEC is not the only regulator that has scrutinized Voyager’s Chapter 11 restructuring plan. The US Attorney for the Southern District of New York, Damian Williams, called it “blatantly illegal” to seek legal protection from possible civil or criminal fraud charges. The state securities regulator in New Jersey supported Williams’ objection. The securities and banking regulators in Texas have taken issue with Voyager not being more explicit in informing unsecured creditors that their payout could drop from an estimated 51% to 24% of the value of their assets if the company doesn’t win its lawsuit against Alameda Research.
Alameda Research sued Voyager in January, seeking to recover $446 million in loans it repaid to Voyager Digital. Alameda alleges that Voyager and other crypto lenders “funded Alameda and fuelled [its] alleged misconduct, either knowingly or recklessly.” Now Alameda’s lawyers argue that the money is recoverable and should be used to repay Alameda’s creditors, not Voyager’s.
A more convincing argument
The SEC has until 8th March to present a more convincing argument against Voyager Digital’s restructuring plan, which includes the sale of its distressed assets to Binance US. Judge Michael Wiles criticized the SEC’s objection, stating that it would put a sword over the heads of anyone involved in the transaction. Voyager faces scrutiny from several regulatory bodies, including Texas regulators, the US Attorney for the Southern District of New York, and the state securities regulator in New Jersey, who have all raised concerns about Voyager’s restructuring plan.
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