Binance.US has hit a major hurdle in its bid to acquire the assets of bankrupt crypto lender Voyager Digital in a deal worth more than $1 billion after Michael Wiles, a bankruptcy judge in the Southern District of New York, overruled several objections to the proposed acquisition .
While the judge said he would finalize the confirmation order, he said he was in favor of approving the deal. Binance.US may still need to clear certain regulatory hurdles before the deal can be finalized. Voyager’s VGX token surged more than 8% in the minutes following the ruling.
The plan, drawn up after previous bidder FTX itself filed for bankruptcy protection in November, was backed by 97% of Voyager’s creditors who responded to the proposal, which would allow them to recover nearly three-quarters of their holdings.
The lengthy hearing began with good news for creditors, with Voyager lawyers saying creditors could potentially make a 73% recovery — with a rising crypto market raising a previous estimate of 51%.
However, regulators from Texas and New Jersey have warned that those gains could be significantly dampened if FTX’s Alameda Research manages to recover $445 million in loan repayments made before its own bankruptcy filing in November.
During day four of Tuesday’s hearing, Judge Wiles ultimately ruled that these regulators’ objections were outweighed by the need to proceed with Voyager’s restructuring.
The court heard from a range of witnesses on complex issues, such as whether personal data would be transferred to Binance.US as part of the deal, and why the transfer was a better deal for creditors than immediate liquidation.
Creditors questioned Voyager’s financial advisors on issues such as how to deal with more exotic types of crypto assets and how to deal with clients in states such as New York, Texas, Vermont and Hawaii, where regulators do not allow Binance.US to operate.
The hearing, which began Thursday, also gave various parties and regulators the chance to object to the proposed sale. The judge eventually ruled that many of these objections were not valid arguments or had unnecessarily stalled the proceedings.
“If the government wants to litigate that “Voyager’s sale of VGX tokens was an offering of securities, it should have done so,” he said, citing an SEC attorney’s statement that the proposed sale may be related to securities laws. However, the regulators have not opted for this; based on the evidence provided at the hearing, Wiles would have had “no choice” but to decide that the transactions were perfectly legal, he added.
Other concerns raised by the parties included the possibility that Voyager customer data, including social security numbers, would be shared with Binance.US and stored in offshore databases. A lawyer representing Binance.US said that no Binance.US employee would have access to this type of information.
Jamie Crawley contributed reporting.
UPDATE (March 7, 2023, 22:10 UTC): Adds VGX token peak.