DoJ appeals against Voyager asset deal with Binance US

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The US Department of Justice (DoJ) has filed an appeal against a judge’s approval of a bankruptcy plan for Voyager Digital that includes Binance US buying billions of dollars in assets. 

The document was submitted early this morning by the DoJ’s bankruptcy component overseeing New York (US Trustee, Region 2) to the District Court for the Southern District of New York (SDNY).

Details remain unclear, yet further communications in regards to the Voyager appeal could confirm that Binance US is under investigation by the DoJ, as has been suspected by critics. Its parent company Binance has been the subject of a DoJ probe since 2018 for potential US money laundering.

Customers have spent seven months waiting for their funds to be recovered — the crypto brokerage filed for bankruptcy back in July. In the past six weeks, analyst Wu Blockchain estimates Voyager Digital has dumped over $350 million of on-chain assets through Binance US, along with Coinbase and over-the-counter (OTC) desks.

Voyager’s remaining assets are reportedly worth around $760 million, mostly converted into USDC ($488 million), along with:

  • about $150 million in ether,
  • more than $50 million in its native Voyager token,
  • and just over $40 million in SHIB.

The DoJ’s appeal against Voyager’s plan was made early this morning. However, an organized group of creditors had pre-emptively said they would fight back against attempts by the US government to thwart the Binance US plan:

“The [Voyager Official Committee for Unsecured Creditors] will work with the Debtors to oppose any appeal. However, an appeal could significantly delay creditor recoveries,” it wrote on Twitter.

Indeed, affected parties must now wait even longer to hear if a plan will go ahead that puts trapped funds into the hands of a firm suspected of securities violations, and owned by a global exchange accused of facilitating money laundering and evading sanctions, among other glaring issues.

Read more: The deep ties between Binance, Bitzlato, and darknet market Hydra

DoJ’s Voyager appeal filed after SEC concerns dismissed

Voyager Digital put up virtually all of its assets for auction on September 13. Sam Bankman-Fried’s crypto exchange FTX.US had the winning bid — but then it went bankrupt. Voyager’s plan ended up with Binance US acquiring around $1 billion worth in customer assets for $20 million.

However, the deal was opposed by the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and New York regulators in February of this year. The SEC claimed that the plan could violate securities law — Binance US is already under the microscope for the same offence.

According to the agencies, the deal didn’t do enough to alleviate concerns that Binance US execs or “foreign persons or entities” would have access to customer keys. Neither did the bankruptcy deal mention how it would “ensure that customer assets are not transferred off the Binance US platform.” The SEC further noted how the deal potentially relieves Voyager executives of pending fraud claims.

New York Attorney General (NYAG) Letitia James stated Voyager “illegally operated a virtual currency business.” NYAG pointed out that Binance US isn’t allowed to operate in New York — the Voyager plan could potentially harm residents, she argued, since they would need to use the exchange to access funds.

Read more: Texas tries to block Voyager sale, reveals FTX investigation

The Texas State Securities Board and Texas Department of Banking chimed in with their own objections. They stated the plan didn’t adequately detail the terms of the acquisition, and raised concerns that Binance US hadn’t done enough to show that it operates independently of Binance — as of August 19, 2021, Binance chief Changpeng Zhao owned 90% of Binance US equity.

Voyager asked users to vote on the company’s chapter 11 plan at the start of March. Results showed 97% of customers were in favor of Binance.US acquiring assets and faciliating the recovery of assets. The firms say that around 73% of customer funds can be returned following their plan.

It was given the green light on March 6, after four days of debate in court. US bankruptcy judge Michael Wiles rejected arguments made by US regulators against the deal, stating: “I cannot put the entire case into indeterminate deep freeze while regulators figure out whether they believe there are problems with the transaction and plan.”

It remains to be seen if that same sense of urgency will be applied to the DoJ’s Voyager appeal.

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