US regulators have voiced opposition to the $1.02 billion deal between Binance.US and Voyager exchange. Binance.US intended to acquire Voyager’s assets, but New York regulators questioned the purchase and its motives.
According to regulators, increasing crypto interventions by the Securities and Exchange Commission (SEC), whose investigations into alleged sales of unregistered securities recently, have caused exchange Kraken to shut down its staking operations.
Furthermore, elements of the proposed Binance.US settlement may also break the law. This is because Binance plans to reimburse former Voyager customers, but did not explain the source of the sources.
Risk of breaking the law
According to the SEC, Binance.US even submitted proposals for transactions in crypto assets necessary to effect the rebalancing of Voyager.
However, the SEC asserts that redistribution of such assets to account holders may violate the prohibition in Section 5 of the Securities Act of 1933.
That article states that a company may not make an unregistered offer, sale or delivery after the sale of these securities. In this regard, the SEC specifically cites the VGX token, issued by Voyager and distributed to its customers.
“It is the burden of the Debtors to present credible evidence that the provisions of the Plan are enforceable and do not violate applicable law,” the SEC said.
The regulator also cited news that Binance is preparing to pay fines for past money laundering infractions. According to the SEC, this would constitute an “admission of guilt” and further evidence that the deal may become “unfeasible” and “impossible to consummate”.
troubles in new york
The New York State Department of Financial Services (NYDFS), as well as Attorney General Letitia James, also questioned the settlement. But in this case, the dispute involves Voyager, which would not be authorized to serve customers within the state.
“Despite the fact that none of the Debtors are licensed in New York, the Department is aware of allegations and other information indicating that one or more of the Debtors may have operated and may continue to operate in New York in violation of Applicable Law,” it said. the NYDFS.
Therefore, the NYDFS accuses Voyager of illegally operating an in-state virtual currency business without a license, in violation of New York laws and regulations. Another reason is that the NYDFS claims that the bankruptcy showed that Voyager lacked protection mechanisms for its customers.
Another problem with the purchase plan is that the text has a specific limitation for New York. Binance.US intends to refund all customers, but New Yorkers would have to wait six months to get their money back.
The agreement points out that the deadline is intended to guarantee time while Binance.US obtains approval in the state, but it is a limitation. Therefore, prosecutors ask for more time to analyze the agreement and may even reject the merger between the companies.
Limitations to the agreement
This is the second objection the SEC has filed to the settlement in 2023, and the first broader one. Last month, the regulator placed a limited objection to the deal, saying there were not enough details to show that Binance.US could pay the amount.
The US Federal Trade Commission (FTC) has also indicated it is investigating Voyager, which filed for bankruptcy in July on charges of false advertising.
In response, Voyager stated that the deal with Binance.US offers the best possible outcome for the platform’s lenders. The company has been heavily critical, saying the NYDFS’s objections are “hypocritical” because regulators themselves are limiting the company’s ability to repay its customers.
Voyager’s creditors themselves have until 6 pm – Brasília time – this Wednesday (23), to approve the agreement. According to Voyager’s lawyer, with a few hours to go before the vote, the vast majority of creditors support the operation.