Voyager Bankruptcy Judge Stops SEC From Punishing Executives

Voyager Bankruptcy Judge Michael Wiles has stopped the U.S. Securities and Exchange Commission from penalizing Voyager executives and bankruptcy advisers over a new crypto asset included in the company’s restructuring plan.

Judge Wiles said the threat of future regulatory action against the individuals named in Voyager’s restructuring plan would delay bankruptcy proceedings.

Voyager changes plan to limit bankruptcy protection for executives

His comments stem from US bankruptcy law, which protects specialists involved in a bankrupt company’s restructuring plan from legal action.

The broad strokes of the law mean that Voyager employees can violate U.S. securities laws, argued SEC attorney Therese A. Scheuer. Voyager lawyers agreed to limit the immunity level by slightly reformulating the bankruptcy plan.

Voyager advisor Mark Renzi said: “Debtors will comply with all laws if applicable rules are enacted or promulgated in the future.”

The ruling comes as a hearing on whether to allow Binance.US’s acquisition of Voyager Digital in the bankruptcy court for the Southern District of New York.

Voyager filed for bankruptcy in July 2022 after bankrupt hedge fund Three Arrows Capital defaulted on a $660 million loan. It recently agreed to sell itself to Binance.US for $1.02 billion.

The SEC had previously objected to the sale, arguing that Binance.US was running an unregistered US stock exchange. It also alleged that any post-sale asset distribution could violate federal securities laws.

Recent media reports of the exchange’s alleged involvement in money laundering and other crimes would make the deal “difficult to complete,” the agency also argued.

Crypto Lawyer Questions SEC Motives in Voyager Case

Crypto lawyer John Deaton, who successfully advocated limiting the SEC’s reach to secondary sales of LBRY’s LBC token, spoke to BeInCrypto about the SEC’s objections.

“Voyager’s bankruptcy is another example of the SEC pursuing its anti-everything crypto agenda. It is also another example of a federal judge taking out the SEC’s lawyers for not only abandoning the law, but also the investors they took an oath to protect,” he said in a written response to an e-mail. -mail.

“The truth is that the distribution cannot really be considered an unregistered offering of securities under the law, because it is a distribution that takes place in bankruptcy proceedings. Ask yourself, who is the SEC protecting here? They are certainly not investors.”

Wiles had previously argued that these objections provided no concrete evidence to oppose the sale and rejected a request from SEC attorney William Uptegrove for an ex parte consultation.

Voyager’s bankruptcy is costing creditors $10 million a month

Renzi said today that the SEC’s delays have cost the company $10 million a month, which could be paid back to creditors.

Voyager burns $10 million a month | Source: Mark Renzi

He also denied allegations by SEC staff that Voyager’s VGX token was a security, citing previous disclosures the company made to SEC upon request. In addition, he confirmed that “nationally recognized” lawyers had confirmed that VGX was not a security.

VGX Disclosure
Renzi’s Comments on Previous VGX Disclosure | Source: Mark Renzi

Consultants and other bankruptcy professionals are generally paid earlier than the bankrupt company’s creditors.

A December 2022 report from CNBC found that the CEO of defunct crypto exchange FTX, bankruptcy expert John J. Ray III, was taking in $1,300 an hour as an independent contractor and earning $250,000 a month, taking two weeks of vacation per month. year included. He took over as CEO when the stock went bankrupt in November 2022.

Kathryn Schultea and three other advisors make about $5.9 million annually. These contractors, along with Ray, cost FTX about $8.5 million annually.

Judge Wiles must approve the sale of the Voyager by March 6, 2023 or the deal cannot go through.

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BeInCrypto has reached out to the company or individual involved in the story to get an official statement on recent developments, but it has not yet heard back.

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