A judge in the Southern District of New York says he will prevent the SEC from interfering in a bankruptcy case by claiming a new crypto asset is a security.
Judge Michael Wiles says he won’t allow the U.S. Securities and Exchange Commission to penalize executives and advisors working on proposals to create a new token that would help customers repay, Bloomberg reports.
Early this year, the SEC objected to bankruptcy proceedings for embattled cryptocurrency lender Voyager, which would help pay back customers affected by the lender’s collapse.
Judge Michael Wiles initially said he needed details on why the SEC is objecting and why it has decided to “stop everyone” with little to no explanation of his concerns.
Now, in a new ruling, Judge Wiles says the SEC’s position would do nothing but damage, putting “a sword over the heads of anyone who’s going to make this transaction.”
The judge condemned the SEC’s interference, asking, “How can a bankruptcy case or a court proceeding function with those kinds of suggestions?”
The bankruptcy proceedings stem from Binance.US’ acquisition of more than $1 billion in Voyager assets, a deal that was signed after FTX’s plans to acquire the assets evaporated.
Judge Wiles says the SEC may prosecute Binance.US or Voyager’s attempts to actually issue a bankruptcy token in the future.
But he says it would be flat out wrong to punish individuals for working on their proposals in court.
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Featured image: Shutterstock/Marian Salabai/Natalia Siiatovskaia