On March 6, 2023, bankruptcy judge Michael Wiles ruled that the US Securities and Exchange Commission (SEC) would be barred from imposing fines on Voyager Digital officials if the company issues bankruptcy tokens to reimburse affected clients.
This decision was made during the third day of hearings on Voyager’s proposal to sell $1 billion in assets to Binance.US and issue a repayment token. The SEC had previously argued that the payback token would constitute an unregistered security offering because Binance.US operates an unlicensed securities exchange.
During the hearings, Wiles expressed concern about the US SEC’s position, stating that it would leave a “sword hanging over the heads” of anyone attempting to conduct such a transaction.
The SEC had opposed a common legal defence often used by executives and restructuring consultants of a bankrupt company, which shields them from claims when carrying out a court-approved bankruptcy plan. The SEC argued that these legal protections were overly expansive, allowing Voyager employees and legal representatives to violate securities laws without consequence.
As a result of these arguments, Voyager’s legal team decided to modify their strategy to limit the scope of these legal protections. The court must now issue a sanctioning order for the sale of its assets to Binance.US to proceed.
Although the ruling prevents the SEC from imposing fines on Voyager officials, Wiles noted that the SEC and other regulatory bodies could still take legal action to shut down Binance.US or halt the release of the cryptocurrency by Voyager. He added that if the restructuring plan was approved, it would not be appropriate for the US SEC to pursue individuals for their role in the proposals.
The restructuring plan, which would enable Voyager to emerge from Chapter 11 bankruptcy, was first announced on December 19, 2022. Under the plan, cryptocurrency platform Binance would purchase Voyager’s assets for $1.02 billion. Voyager claimed the proposal was the biggest and best offer for its assets.
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