Voyager Digital and its creditors face the possibility of losing up to $100 million if the U.S. government’s legal objections are not resolved by April 13.
Why the deadline?
The bankrupt cryptocurrency lender has taken urgent legal action to enable a $1 billion purchase by Binance.US, as it is concerned that disagreements over the terms of the contract could cause Binance.US to withdraw.
As per the filing submitted by Voyager’s creditors, they stated that “the consummation of the plan by April 13 is necessary to preserve massive creditor value. The evidence is uncontroverted that, if the deal is not completed, Voyager’s creditors will lose roughly $100 million in value”.
Voyager has also filed an appeal in the U.S. Court of Appeals for the Second Circuit in New York, indicating that delays could cost up to $10 million per month and more than one million Voyager customers wouldn’t be able to access their savings.
Under the deal, which was approved by U.S. Bankruptcy Judge Michael Wiles in March and signed by Binance.US in December, the exchange could opt out of the deal if it is not closed within four months.
The lawyers representing the U.S. government have argued that the terms of the contract would let Voyager escape any breaches of tax or securities law, and last week, U.S. District Judge Jennifer Rearden agreed to halt the deal while the issue is resolved.
The U.S. Securities and Exchange Commission previously argued that assets involved in the transaction, such as the Voyager token VGX, could constitute unregistered securities, but this was denied by Wiles.
Substantial case on the merits of Voyager-Binance deal
Last Friday, District Judge Jennifer Rearden said the U.S. government has a “substantial case on the merits” to block the $1 billion deal between Binance.US and Voyager Digital.
The judge has promised to expedite the settlement process, given that delays could cost as much as $10 million per month for the estate.
In March, U.S. Bankruptcy Court Judge Michael Wiles sanctioned the sale, but this week Rearden said that she would put it on hold while she considered the objections from the U.S. Attorney that the contract effectively exculpated Voyager from breaches of tax or securities law.
In her latest ruling published last Friday, Rearden indicated her sympathies with the government’s position. She said that the Exculpation Clause appears to go further than the quasi-judicial immunity doctrine allows.
Rearden added that the government’s argument has “gone entirely unrebutted” by Voyager and its creditors, neither of which has provided any authority for the proposition that a bankruptcy court can release criminal liability.
Binance’s U.S. arm acquired Voyager last year after the previous bidder, FTX, itself collapsed. This week, Binance’s global entity and its CEO, Changpeng Zhao, were sued by the Commodity Futures Trading Commission for offering unregistered crypto derivatives.
Zhao has stated that the lawsuit is an “incomplete recitation of facts”. The legal dispute between Voyager and Binance.US could have far-reaching implications for the cryptocurrency industry.
If the legal objections are not resolved by April 13, Voyager Digital and its creditors could suffer a loss of up to $100 million, while Binance.US could withdraw its $1 billion purchase offer.
