Voyager Digital, a digital currency broker, is in the middle of a bankruptcy court battle as it seeks to finalize its reorganization plan to sell its remaining assets to Binance US. On Monday, Judge Michael Wiles expressed his displeasure with an objection to the plan raised by the Securities and Exchange Commission (SEC). Referring to the SEC’s concern, Judge Wiles remarked that the Commission’s objection would leave “a sword hanging over the heads of anybody who’s going to do this transaction.”
What is the issue?
Since September, Voyager Digital has been trying to finalize a plan to distribute assets to customers, creditors and investors. As part of this plan, Voyager seeks to sell its remaining assets to Binance US. However, the SEC, U.S. Attorney for the Southern District of New York, New Jersey securities regulator, and the Texas Banking Commission have voiced their objections to the plan.
The SEC has expressed concern that aspects of Voyager Digital’s restructuring plan may violate federal securities laws and has called into question the proposal’s language that seeks legal protection for persons involved in the deal with Binance US. The SEC views the language as an “absolute immunity” that may leave the company unaccountable for possible violations.
The U.S. Attorney for the Southern District of New York claims that the plan is “blatantly illegal” as it seeks legal protections from possible civil or criminal fraud charges. The state securities regulator in New Jersey backs the U.S. Attorney’s objection. Texas regulators have expressed their objections to Voyager not providing adequate notice of their potential payout from their reorganization plan, which may drop from an estimated 51% to 24%.
What does the objection mean? Judge Wiles was preparing to issue a decision on the plan on Friday before the SEC’s objection was heard. However, he now has given the securities regulator until tomorrow morning to present a more convincing argument against the proposal.
The Federal Trade Commission (FTC) has also objected to Voyager’s restructuring plan, arguing that it would unlawfully bar the company from being held accountable for “actual fraud, willful misconduct, or gross negligence.” However, the FTC has since negotiated with Voyager’s legal team to establish “certain carve-out language,” intended to address the Commission’s objections.
What happens if the plan isn’t approved?
If the judge rules against Voyager, the company may have to issue a third round of bidding and solicit new proposals from other buyers, during which time investors and customers could be left in limbo.
At the moment, it’s unclear whether Voyager will have to present a modified plan for the court’s consideration. Regardless, Judge Wiles has made it clear that the SEC’s nebulous reasoning for objection will not be tolerated and has encouraged the Commission to provide more detailed reasoning as to why the plan should be denied. The fate of Voyager and its customers hinges on the SEC’s ability to clearly articulate its concerns.