A judge approved the U.S. subsidiary of Binance, the first cryptocurrency exchange in the world, to receive the customer accounts and $1 billion worth of crypto from bankrupt Voyager Digital.
Crypto brokerage Voyager Digital had its assets frozen after filing for Chapter 11 in 2022. The deal between Voyager and Binance.US was approved on March 7 by Judge Michael Wiles of the U.S. Bankruptcy Court for the Southern District of New York.
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The judge approved the deal even though the U.S. Securities and Exchange Commission said on March 3 that the U.S. arm of Binance could itself face regulatory sanctions after it deemed the subsidiary's operations to be an unregistered securities exchange.
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Judge Says SEC Staff Viewpoint Not Sufficient
Wiles said the SEC’s viewpoint from its staff was not sufficient to prevent the deal from proceeding since the stance is not from the commissioners.
“The SEC didn’t say why they say Binance.US is operating as a securities broker," he said in the ruling. "If we were to try to address the issue we’d have to guess.”
Customers of Voyager Digital will receive new accounts from Binance.US.
The SEC did not indicate that a sale would violate current securities laws, Wiles said in his ruling.
The agency “was not affirmatively contending that [Voyager] was doing anything wrong nor that Binance.US was doing anything wrong,” he wrote in the ruling.
Voyager's customers can also receive their funds in cash if they decide not to move their assets to Binance.US. The deal was approved by 97% of Voyager's customers.
The bankrupt crypto trading platform said its customers would be able to receive as much as 70 cents on the dollar in its restructuring plan, Voyager Digital's investment banker said during the hearing.
Binance.US said on March 7 through its representative that the bankruptcy court “agrees with 97% of Voyager customers who voted that our plan provides the best path forward for Voyager users to retake control of their assets.”
The global company Binance faces its own woes and expects to pay fines, according to the WSJ.
Binance Money Transfers
Binance had access to a bank account belonging to Binance.US., according to Reuters, which reports that Binance executives transferred hundreds of millions from this account to a trading platform, Merit Peak. The manager of Merit Peak was Changpeng Zhao, the founder of Binance and great rival of Sam Bankman-Fried.
Binance.US executives at the time were unaware of these money movements and learned about them after they were made, according to Reuters which cites text messages between the CEO of Binance.US and a Binance executive.
The money transfers started at the end of 2020, and during the first three months of 2021, more than $400 million were transferred.
Binance and Binance.US are two independent entities, but the American division must respond to U.S. regulators while the first is a global platform that escapes U.S. regulations.
As two independent companies, they should not use or have access to each other's accounts. Reuters explains that it was unable to determine whether the funds transferred to Merit Peak were the funds of Binance.US customers.
Binance.US has dismissed this information, saying, in a tweet, that "only Binance.US employees have access to Binance.US bank accounts. Period."
