The US Securities and Exchange Commission (SEC) has objected to Binance.US’ move to acquire over $1 billion in assets belonging to defunct cryptocurrency lending firm Voyager Digital.
According to a Feb. 22 filing with the U.S. Bankruptcy Court for the Southern District of New York, the SEC believes that certain aspects of the asset restructuring plan of the Binance.US acquisition could violate securities law.
The SEC is formally investigating whether Binance.US and related debtors violated anti-fraud, registration and other provisions of the federal securities laws. The SEC has noted particular concerns about securing assets through the planned acquisition.
The SEC claims that the information provided in Voyager’s planned asset purchase does not sufficiently indicate whether Binance.US or affiliated third parties will have access to customer wallet keys or control over anyone who has access to such wallets.
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The filing further points to a lack of safeguards to ensure that customer assets are not transferred from the Binance.US platform. The SEC also alleges that Binance.US failed to disclose internal controls and procedures to ensure the safety of customer assets.
The SEC calls on Binance.US to address these issues by providing information on who has access to customer assets and the necessary controls after a transaction is completed.
The SEC is mainly focused on part of the original Binance.US plan and disclosure statement for Voyager’s offering. The company will retain the right to sell cryptocurrencies belonging to Voyager and distribute them to account holders, a major concern of the US regulator.
“However, the Borrowers (Binance.US) must still demonstrate that they would be able to make such sales in compliance with federal securities laws.”
According to the filing, various cryptocurrency transactions will have to take place to balance the funds for redistribution to account holders, which the SEC says may violate parts of the Securities Act.
The regulator argues that the disclosure statements provided by Binance.US and other debtors do not address the possibility that these transactions are illegal. It is believed that this option could affect the estimated 51% return of funds paid to Voyager account holders and claimants.
A footnote in the filing highlights the potential for Voyager to buy and sell certain digital assets to rebalance its holdings. The SEC warns of a potential sale of Voyager Tokens (VGX), issued by Voyager, which “may constitute an unregistered offer or sale of securities under federal law.”
The SEC also notes that Binance.US could operate as an exchange under existing exchange laws, which it is prohibited from doing without the necessary registration as a national stock exchange or an exemption from that activity.
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 any of their assets following the firm’s bankruptcy:
“Creditors and stakeholders have a right to know whether this transaction provides them with a meaningful economic benefit, or whether it is merely a $20 million sale of Voyager’s customer list to Binance.US.”
As reported by Cointelegraph, Binance is seeking a remedy prior US regulatory and law enforcement investigations The Company faces the possibility of fines related to prior compliance issues.
Binance is too dealing with regulatory measures to Paxos, which is responsible for issuing US dollar-backed Binance USD (BUSD) stablecoin. The New York Department of Financial Services ordered the firm to stop minting BUSD tokens as of February 21. Paxos has against SEC claims that BUSD is a security after Wells received notification from the regulator that it had not registered the token as a security in the US
