US Officials Oppose Voyager Sale Provision

Zach Anderson   Mar 16, 2023 09:37


United States officials have expressed their desire to remove a provision from the bankruptcy plan of Voyager Digital, a defunct lender, as they believe it would hinder the government's ability to enforce its police and regulatory powers. Voyager Digital has proposed selling its digital assets to Binance.US, a leading cryptocurrency exchange. However, the provision in question would prevent US officials from legally pursuing anyone involved in the sale.

In a motion submitted to a New York bankruptcy court on March 14, U.S. trustee William Harrington, along with other government attorneys, claimed that the court "improperly exceeded its statutory authority" when it approved the pardoning provision. They have requested a delay of two weeks for the court's approval of the sale, allowing them time to file an appeal.

The provision aims to protect those involved in carrying out the sale from being held personally liable for its implementation. The court approved this measure on March 7, after a February 28 filing revealed that 97% of Voyager customers were in favor of the plan. While the U.S. officials have no objections to other aspects of the proposed sale, they argue that the provision would impede their ability to enforce their regulatory powers.

On March 6, the U.S. Securities and Exchange Commission (SEC) also raised objections to the plan, particularly the "extraordinary" and "highly improper" exculpation provision. The SEC argued that the repayment token would constitute an unregistered security offering and that Binance.US is operating an unregulated securities exchange.

Voyager Digital's proposed sale comes after the company filed for bankruptcy due to financial troubles, which have been affecting the crypto lending industry. Crypto lenders, such as Voyager, provide customers with loans backed by their cryptocurrency holdings. In recent times, these lenders have faced increased scrutiny from regulatory bodies, leading to difficulties in continuing operations.

A hearing on the issue is scheduled for March 15 at 2:00 pm Eastern Time. Based on the latest estimates, the plan is expected to result in Voyager creditors recovering approximately 73% of the value of their funds. The outcome of this case will have a significant impact on the future of crypto lending and may set a precedent for similar cases involving bankruptcy sales and regulatory enforcement.

In conclusion, US officials are contesting a provision in Voyager Digital's bankruptcy plan that would prevent legal pursuit of those involved in the sale of its assets to Binance.US. With a hearing scheduled for March 15, the outcome may have broader implications for the crypto lending industry and regulatory enforcement.


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