FTC investigates Voyager over deceptive crypto marketing

Updated: 23 February 2023

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The US regulators have been cracking down hard on the cryptocurrency industry, with the US SEC leading the charge. However, when it comes to the bankrupt crypto lender called Voyager Digital and its executives, they are actually being probed by the US Federal Trade Commission (FTC). The FTC’s recent filing said that it suspects the bankrupt crypto lender had engaged in deceptive cryptocurrency marketing.

https://twitter.com/ChainArchives/status/1628400689700388867

The suspicion led to a thorough investigation, which is currently still on-going. The FTC noted that it does not want any plan to wind up the affairs of the “debtor,” meaning Voyager, to disrupt its investigation of the failed crypto firm.

The FTC is investigating Voyager’s marketing practices

The filing further says that

The FTC has commenced an investigation into certain acts and practices of Debtors and Debtors’ employees, directors, and officers, for their deceptive and unfair marketing of cryptocurrency to the public.

Voyager filed for bankruptcy as a consequence of difficult market conditions, with a bankruptcy plan being proposed by the firm on January 13th. The plan involved selling the firm’s assets to Binance.US, the US-based subsidiary of the world’s largest crypto exchange by volume. However, the part that the FTC has a problem with is that the plan would have released both the firms and its employees from any financial claims.

Since that also includes claims connected to any potential wrongdoings, the FTC is not willing to let this happen until it establishes whether there were any wrongdoings, what they involved, and who is responsible.

US Authorities oppose the Binance.US-Voyager plan

The filing further said that the proposed plan could not be confirmed as it violates the bankruptcy code, and relevant case law. As plan proponents, the debtors — meaning Voyager and its employees — are the ones who bear the burden of proof with respect to the confirmation requirements. However, the FTC established that they could not meet this burden. As a result, the FTC has the authority to halt the execution of the proposed plan, which, according to the regulator, is nothing more than a disguised discharge to which the debtors are not entitled to, given the circumstances.

On its end, Binance.US intended to purchase Voyager’s assets for $1.02 billion in a deal that now seems rather unlikely. Furthermore, some elements of the deal itself may infringe the law, as the deal says that the transactions in crypto assets necessary to effectuate the rebalancingand redistribution of assets to account holders could violate the prohibition of the 1933 Securities Act.

Apart from the FTC, the deal was also opposed by the NYDFS (New York State’s Departmen of Financial Services), and Attorney General Letitia James.

The U.S. SEC, along with the NYDFS and Attorney General Letitia James, filed opposition to BinanceUS' acquisition of Voyager's assets worth $1.02 billion, citing concerns regarding the deal.

The filings were made on February 22: CoinDesk.

— BecauseBitcoin.com (@BecauseBitcoin) February 23, 2023