Voyager’s $1 Billion Binance.US Rescue Deal Blocked: What’s Next for Customers?

Just when Voyager Digital customers thought they could see a light at the end of the tunnel, a major roadblock has emerged. The highly anticipated $1 billion acquisition of the bankrupt crypto lender Voyager by Binance.US has been unexpectedly halted by a U.S. federal court. This sudden stop, triggered by an emergency stay granted by Judge Jennifer Rearden, throws the future of Voyager and its users back into uncertainty. Let’s dive into what led to this dramatic turn of events and what it means for everyone involved.

Why Was the Voyager-Binance.US Deal Put on Ice?

The U.S. government, specifically the Department of Justice (DOJ), stepped in to pump the brakes on the deal. On March 27th, Judge Jennifer Rearden of the U.S. District Court in New York sided with the DOJ’s request for an emergency stay, temporarily blocking the sale. This decision came after the DOJ filed an appeal against Voyager’s bankruptcy plan, raising concerns that the deal might not be in the best interest of all parties involved, particularly regarding regulatory compliance and customer protection.

Here’s a quick timeline of the key events leading to this halt:

• March 7: Bankruptcy Judge Michael Wiles initially approved Binance.US’s bid to purchase Voyager Digital. This was seen as a positive step towards Voyager customers potentially recovering some of their funds.
• March 15: The U.S. Securities Exchange Commission (SEC) voiced concerns, suggesting Voyager’s bankruptcy plan could lead to financial misconduct. Judge Wiles dismissed these concerns at the time.
• March 17: The Department of Justice (DOJ) filed an urgent request for a stay, appealing the bankruptcy plan.
• March 20: Voyager Digital and the Official Committee of Unsecured Creditors objected to the DOJ’s request, pushing to keep the sale on track.
• March 21: The DOJ responded with a final “reply” motion, further solidifying their stance against the deal in its current form.
• March 27: Judge Jennifer Rearden granted the DOJ’s emergency stay, effectively halting the Binance.US acquisition pending the resolution of the DOJ’s appeal.

What are the DOJ’s Concerns?

While the specifics of the DOJ’s appeal are still unfolding, their intervention signals significant concerns about the deal. These concerns likely revolve around:

• Regulatory Scrutiny: Binance.US, like many crypto exchanges, operates in a regulatory landscape that is still evolving. The DOJ might be seeking greater clarity and assurances regarding Binance.US’s compliance with U.S. laws and regulations.
• Customer Protection: While the sale aims to return funds to Voyager customers, the DOJ may have reservations about whether the proposed plan adequately protects all creditors and ensures fair treatment.
• National Security: In some cases, government agencies can intervene in business transactions if they raise national security concerns, although it’s not explicitly stated if this is a factor in this case.

Voyager’s Bankruptcy and the Road to a Sale: A Recap

Voyager Digital, a platform for trading Bitcoin and other cryptocurrencies, filed for Chapter 11 bankruptcy on July 5th. This followed a period of market turmoil and liquidity issues affecting several crypto firms. Since then, Voyager has been navigating the complex bankruptcy process, seeking ways to recover assets and compensate its users.

The proposed sale to Binance.US emerged as a potential lifeline. It promised to inject much-needed capital and provide a pathway for Voyager customers to recoup a portion of their lost funds. Judge Wiles’ initial approval on March 7th was a major step forward, even including a plan to distribute tokens representing bankruptcy claims to affected Voyager account holders.

What Does This Halt Mean for Voyager Customers?

For Voyager customers, this legal roadblock is undoubtedly frustrating and creates further uncertainty. Here’s what they need to understand:

• Delayed Recovery: The emergency stay means the payout process, which was contingent on the Binance.US deal closing, is now delayed indefinitely.
• Ongoing Uncertainty: The DOJ’s appeal adds another layer of complexity and unpredictability to the bankruptcy proceedings. The ultimate outcome and timeline are now less clear.
• Potential for Plan Modification: Depending on the court’s ruling on the DOJ’s appeal, the terms of the sale or the bankruptcy plan itself might need to be renegotiated or modified.

Despite the setback, the Official Committee of Unsecured Creditors, representing Voyager customers, remains committed to pushing back against the government’s efforts. In a tweet on March 27th, they stated their continued aggressive opposition to the DOJ’s intervention.

The Committee is disappointed by the SDNY Court's decision to grant the government's stay request. While this is a setback, the Committee will continue to aggressively oppose the Government's efforts. We believe the Bankruptcy Court's findings were correct and will continue to support the Debtors' efforts to close the deal and return value to customers.

— Voyager Official Committee of Unsecured Creditors (@VoyagerUCC) March 27, 2023

Customer Support for the Binance.US Deal: A Glimmer of Hope?

Interestingly, a prior poll included in a court filing on February 28th showed overwhelming support for the restructuring plan among Voyager account holders. Out of 61,300 respondents, over 97% were in favor. This plan is projected to recover approximately 73% of the debt owed to Voyager customers. This strong customer backing underscores the desire for a swift resolution and a return of their assets.

What Happens Next?

Judge Rearden is expected to release a detailed opinion explaining the rationale behind granting the emergency stay. This opinion will provide more insights into the court’s concerns and the path forward. The legal battle between Voyager, Binance.US, and the DOJ is likely to continue, potentially leading to further negotiations or court hearings.

For now, Voyager customers are left in a state of limbo, waiting for the legal process to unfold. The promise of a Binance.US rescue is still on the table, but its realization is now significantly more uncertain. The coming weeks and months will be crucial in determining the ultimate fate of the Voyager-Binance.US deal and, more importantly, the recovery prospects for Voyager’s affected users.

Key Takeaways:

• The $1 billion sale of Voyager Digital to Binance.US has been temporarily blocked by a US federal court.
• The Department of Justice requested and was granted an emergency stay, appealing the bankruptcy plan.
• Regulatory concerns and customer protection are likely at the heart of the DOJ’s intervention.
• Voyager customers face further delays and uncertainty in recovering their funds.
• The legal proceedings are ongoing, and the final outcome remains to be seen.

Stay tuned for updates as this story develops. The crypto world is watching closely to see how this high-stakes legal drama unfolds and what it signifies for the future of crypto regulation and bankruptcy proceedings.