U.S. regulators want a judge to stop the acquisition of Voyager Digital, a crypto lender in Chapter 11 bankruptcy proceedings, by Binance.US until the company discloses more about its own finances and corporate relationship with the global Binance crypto exchange.
The Securities and Exchange Commission, the U.S. Trustee within the Justice Department and state regulators from New Jersey and Vermont have filed motions objecting to the acquisition in Voyager's bankruptcy proceedings in the Southern District of New York.
The objections take aim at the proposed buy-out of the distressed lender. The current disclosures for the purchase don't include "necessary information," the SEC argued, and the commission cast doubt on Binance's financial ability to go through with the over $1 billion transaction.
Regulators also raised concerns about the relationship between Binance.US and the global Binance crypto exchange.
The New Jersey Bureau of Securities in particular stressed that "following transfer of coins to Binance.US, Binance.US will have the freedom to direct the cryptocurrency as it wishes, such that without customer knowledge, the cryptocurrency might wind-up in an offshore (non-US custodial) account, outside the reach of U.S. regulatory and enforcement authorities."
The concern ties into complications caused by the fact that FTX's operations largely took place offshore, making customer assets placed in the Bahamas harder to reach. That dynamic has caused friction between the Bahamian government, FTX's Bahamian subsidiary FTX Digital Markets, and the rest of the FTX corporate empire as it goes through U.S. bankruptcy proceedings.
Former CEO Sam Bankman-Fried also faces criminal charges over the mishandling of customer funds, facilitated by offshore entities. FTX co-founder Gary Wang and former Alameda Research CEO Caroline Ellison have already pleaded guilty to fraud in the case.
Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.
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