The deal between Binance.US and Voyager Digital has hit a significant roadblock as the deal breakers voiced objections against it.
The US Securities and Exchange Commission (SEC) has raised objections against Binance.US’ billion-dollar deal to acquire Voyagers’ assets.
In the filings sent to the U.S. Bankruptcy Court in the Southern District of New York, the SEC claimed that some aspects of the deal might violate the laws following the agency’s scrutiny of Voyager’s VGX token.
SEC is Going After Binance.US Again!
The deal between the crypto exchange giant and the defunct lender came to a settlement by the end of last year after Voyager accepted a $1.4 bid from Binance.US to acquire its assets.
Voyager Digital filed for Chapter 11 bankruptcy in mid-2022 after being financially affected by the collapse of Three Arrows Capital. FTX stepped up to rescue the firm but it soon found itself in the same situation, leaving the acquisition opportunity open to Binance.US.
According to the US watchdog, the SEC’s question is whether the acquisition will grant Binance.US control of clients’ wallet keys.
The US watchdog also outlined certain key missing information regarding the safety of clients’ assets, raising concerns over the possibility of funds having moved out of the platform.
The filings seek more clarity on those issues from Binance.US. Additionally, Binance.US and Voyager Digital allegedly conducted a sale of securities without registration, referring to the VGX token sale.
As noted in the filings, ‘the transactions in crypto assets necessary to effectuate the rebalancing, the redistribution of such assets to Account Holders, may violate the prohibition in Section 5 of the Securities Act of 1933 against the unregistered offer, sale, or delivery after sale of securities.’
Binance Under The Gun
SEC is not the only one that has shown disapproval. On the same day, New York State’s Department of Financial Services (NYDFS) and Attorney General Letitia James reportedly filed objections against the deal.
The two entities accused Voyager of potentially unlawful operations in New York.
The SEC previously opposed the transaction owing to concerns about Binance.US’ financial capability. The SEC warned at the time that the exchange would struggle to close the acquisition after previously paying fines for misbehavior.
The announcement comes only days after the SEC fined crypto exchange Kraken, forcing the company to shut down its staking business.
Paxos, the stablecoin issuer, was ordered earlier this month to stop issuing Binance Dollar BUSD. While asserting that the BUSD is not unregistered security, Paxos has chosen to stop minting new BUSD under the supervision of the NYDFS.
While problems with regulators are unlikely to abate anytime soon, a new challenge has emerged. Some Australian consumers stated that Binance abruptly closed their derivative positions after issuing them a notification.
The emergency decision was made following local regulations. Futures trading is only permitted for ‘wholesale investors’ in Australia. To access such a service, traders must verify wholesale investors.
The trade drew harsh criticism for taking action without reasonable notice. Binance responded by stating that it had to close some users’ derivative positions due to inaccuracies in user classification.
The exchange has “already contacted all impacted individuals and will fully refund them for their losses sustained while trading derivatives on Binance.”
The cryptocurrency business in the US has come under the watchful eye of government officials since the start of the new year.
Following the catastrophic events with Luna and FTX, regulators have intensified their oversight of the sector. When approaching the industry, several financial institutions, therefore, show increased levels of caution.
With the company’s prominence in the cryptocurrency industry, Binance has unsurprisingly drawn the attention of numerous regulatory bodies.
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Author: Nicholas Say
