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Justice Department Blocks Binance Takeover Of Voyager

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Justice Department Blocks Binance Takeover Of Voyager
Justice Department Blocks Binance Takeover Of Voyager

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The United States, Department of Justice (DoJ) is now the latest authority to push against the recently approved Binance.US $1.02 billion deal to acquire Voyager Digital’s business assets.

The filing by the DoJ was done last minute – late Thursday and barely a day after a bankruptcy court in New York authorized the deal.

According to court documents, the Department of Justice’s Trustee Office had moved ahead and filed a motion against the arrangement between Binance.US and Voyager toward the end of the highly publicized deal.

The US Securities and Exchange Commission (SEC) was apparently in full support of the move by the DoJ amid allegations of a breach of the securities law by Voyager. In other words, the SEC now claims Voyager sold unregistered tokens, referring to the crypto lender’s VGX token.

Gary Gensler, the SEC’s chair was not convinced that Binance was financially capable to meet all the requirements pertaining to the deal and repay customers who are still stranded.

That’s not all, Voyager Digital is also at loggerheads with the Department of Financial Services (NYDFS) in New York. NYDFS accuses the crypto lender of signing up customers without taking any steps to ensure their protection.

The department argues that Voyager continued to operate in the state of New York illegally without a license. Furthermore, Attorney General Letitia James claims Voyager was as of February 2023 carrying out certain business activities in total disregard of the law.

“Voyager was required to present proof the deal it is seeking with Binance was not in contravention of the very securities laws it is being accused of breaching.

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… It is the Debtors’ burden to present credible evidence that the provisions of the Plan are feasible and not in violation of applicable law,” a statement by the SEC as per a February 2022 filing.

What’s Next for The Binance – Voyager Acquisition Deal?

When the New York bankruptcy Judge Michael Wiles approved the deal, he cited the need to protect creditors and deal with the heavy cloud of uncertainty. Judge Wiles outlined at the time that the US Bankruptcy code “doesn’t contemplate an endless period of time,” but creditors must be protected and prioritized.

“In some cases, their life savings, so we have to take some kind of action,” Judge Wiles said as he gave the go-ahead for Voyager and Binance to conclude the acquisition of the crypto lender’s assets. A bigger chunk of Voyager’s creditors has backed the deal likely to see them recover up to 73% of their funds.

Voyager Liquidates Millions of ERC-20 Tokens

Voyager made headlines after liquidating approximately $56 million worth of ERC-20 tokens in a single day. Most of the liquidations were in Ethereum (ETH), worth around $42 million. The crypto lender also liquidated $11 million in its native token, VGX, $4.4 million in Shiba Inu (SHIB), and $1 in Chainlink (LINK).

The transactions were completed on various crypto exchanges, including Binance.US, Coinbase, and Wintermute. However, some tokens were sold via over the counter (OTC) desks.

The DoJ argues that the Judges approval was broad and did not provide for regulatory enforcement in the event misconduct is discovered at a later stage, thus calling for criminal charges. However, Judge Wiles believes that if there were allegations of misconduct, evidence of the same should have been presented during bankruptcy hearings.

In the agreement, Binance.US agreed to advance $20 million in cash to Voyager in addition to taking on crypto assets deposited by the crypto lender’s customers. In spite of the pushbacks and bottlenecks, Voyager has maintained that the deal with Binance is the only way it can repay its customers.

Voyager is one of the crypto giants that did not survive the TerraUSD (UST) crash in May 2022. Other crypto companies pushed out of business in 2022 are Three Arrows Capital and Celsius.

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