The United States Securities and Exchange Commission (SEC) has opposed the acquisition by Binance.US of more than $1 billion of assets belonging to the defunct cryptocurrency lending company Voyager Digital.
According to a brief filed on February 22 with the Bankruptcy Court for the Southern District of New York, the SEC believes that some aspects of the Binance.US acquisition’s asset restructuring plan could violate securities law.}
The SEC is formally investigating whether Binance.US and related debtors violated anti-fraud, registration, and other provisions of federal securities law. The SEC noted particular concerns around the security of assets through the planned acquisition.
The SEC argues that The information provided in the intended purchase of Voyager’s assets does not adequately describe whether Binance.US or affiliated third parties will have access to client wallet keys or control over anyone with access to such wallets.
Additionally, the filing notes the insufficient provision of safeguards to ensure that client assets are not transferred off of the Binance.US platform. The SEC also maintains that Binance.US has failed to declare internal controls and practices that ensure the security of client assets.
The SEC asks Binance.US to address these issues by providing information on who has access to client assets and the controls required after the trade is complete.
The SEC is primarily focused on part of Binance.US’s initial plan and disclosure statement for its Voyager offering. The company will retain the right to sell Voyager-owned cryptocurrencies for distribution among account holders, which is the main point of concern for the US regulator.
“However, the Debtors (Binance.US) have yet to demonstrate that they would be capable of making such sales in compliance with federal securities laws.”
According to the presentation, several cryptocurrency transactions will have to take place to rebalance the funds for redistribution to account holders, which the SEC believes may violate sections of the Securities Act.
The regulator argues that the disclosure statement provided by Binance.US and other debtors does not address the possibility that these transactions are illegal.. It is believed that this possibility could affect the estimated recovery of 51% of the funds paid to Voyager account holders and claimants.
A footnote to the filing highlights the possibility for Voyager to buy and sell certain digital assets to rebalance asset holdings. The SEC notes the possible sale of Voyager Token (VGX), issued by Voyager, which “may constitute the unregistered offer or sale of securities under federal law.”
The SEC also notes that Binance.US could be acting as an exchange under existing Exchange Act laws, which is prohibited. do without the necessary registration as a national securities exchange or exemption from doing so.
The filing highlights concerns about the legality and overall ability to carry out the planned asset restructuring through the acquisition and questions whether Voyager’s debtors will be able to recover some of their assets following the company’s bankruptcy:
“Creditors and stakeholders have a right to know if this transaction provides them with significant economic benefit, or if it is just a $20 million sale from Voyager’s client list to Binance.US.”
As Cointelegraph reported, Binance is trying to remedy previous regulatory and law enforcement investigations in the US. The firm faces the possibility of fines related to past compliance issues.
Binance is also dealing with regulatory action towards Paxos, which is responsible for the issuance of Binance USD (BUSD), Binance’s USD-backed stablecoin.. The New York Department of Financial Services ordered the firm to stop minting BUSD tokens effective February 21. Paxos has rebutted the SEC’s claims that BUSD is a security after receiving a warning from Wells from the regulator for failing to register the token as a security in the US.
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