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Voyager Digital customers overwhelmingly approve Binance.US buyout despite regulator objections

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(Kitco News) - The $1.022 billion bid by Binance.US for the assets of Voyager Digital received the approval of 97% of bankrupt crypto lender’s customers, despite strong objections from U.S. regulators.

According to a court filing from Feb. 28, nearly all of Voyager’s account holders voted in favor of the plan to sell crypto assets to Binance.US, the United States subsidiary of Binance, the largest cryptocurrency exchange in the world.

Stretto, the firm managing Voyager’s court-supervised restructuring, polled 61,300 account holders who were owed money by the bankrupt crypto lender. 59,183 voted to accept the Binance.US offer restructuring plan, with 2,117 customers, or 3%, voting to reject it. The 97% in favor of the plan represent 98% of the total outstanding customer claims against Voyager.

The overwhelming majority approval by customers for the Binance.US plan comes just one week after the Securities and Exchange Commission (SEC), the New York Department of Financial Services (NYDFS) and the New York Attorney General filed motions to oppose it.

The SEC said in their filing that the Binance.US disclosure statement and plan “do not include necessary information regarding the security of assets” on their platform.

“Specifically, they fail to adequately describe whether third parties, including Binance.US affiliates or foreign persons or entities, will have access to the keys for customer wallets or control over anyone with access to such wallets,” the SEC wrote. “Nor do they sufficiently explain what safeguards have been established to ensure that customer assets are not transferred off the Binance.US platform.”

The SEC is no doubt alluding to the recent revelations that executives at the Binance global exchange maintained access to the accounts of Binance.US and transferred hundreds of millions of dollars from them without the knowledge or consent of the U.S. management team.

The SEC noted in their objection that no formal declaration has been filed by Binance.US outlining its internal controls and practices regarding customer assets. “At a minimum, the Debtors should have to address these issues by providing evidence about who has access to customer assets and the nature of the controls and safeguards over such assets held at Binance.US post-confirmation,” they wrote.

The NYDFS objection, which the New York Attorney General’s office joined, focuses on the fact that Voyager was, and Binance.US remains, unlicensed in New York, which means creditors in the State do not enjoy the protections they would get from regulated firms.

“Prior to the bankruptcy, the Debtors onboarded New York customers and thus illegally operated a virtual currency business within the state without a license,” they wrote. “The Debtors are now proposing to sell their assets to BAM Trading Services Inc. d/b/a Binance.US (“Binance US”), which is also unlicensed to do business in New York.”

“Even putting aside for the moment the Debtors’ past violations of law, the Debtors’ Plan as proposed unfairly discriminates against these New Yorkers by materially delaying their recovery compared to creditors in the same class and by not allowing them the option to recover cryptocurrency instead of liquidated assets.”

On Dec. 19, the bankrupt crypto lender announced that Binance.US had offered them “the highest and best bid for its assets” following a review of all their options, saying the bid was valued at approximately $1.022 billion and “sets a clear path forward for Voyager customer funds to be unlocked as soon as possible.” The bid represented the fair market value of $1.002 billion for Voyager's cryptocurrency portfolio “plus additional consideration equal to $20 million of incremental value.”

Voyager filed for Chapter 11 bankruptcy protection on July 5, 2022 after a liquidity crunch caused in part by Three Arrows Capital defaulting on a $650 million loan amidst the contagion of the collapse of Luna/Terra coins earlier in the spring. Voyager had previously negotiated a sale of its assets to FTX.US for $1.4 billion on Sep. 26, but that deal fell through when FTX filed for its own bankruptcy on Nov. 11.

If the Voyager-Binance.US deal is not closed by April 18, 2023, with the possibility of a one-month extension, the agreement allows Voyager to immediately move to “return value to customers,” meaning they could simply transfer the assets to their creditors instead of attempting to sell them.

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