US markets regulators have opposed Binance US’s proposed $1bn acquisition of the assets of bankrupt cryptocurrency lender Voyager Digital, warning that part of the rescue package may violate securities law.
The Securities and Exchange Commission and the New York Department of Financial Services both filed objections to the purchase of assets belonging to Voyager, which went bankrupt last summer as prices of tokens tumbled and it was unable to repay its lenders.
Their objections increase the focus on Binance, the world’s largest cryptocurrency exchange, and its US affiliate as American authorities expand their crackdown on crypto companies.
Since the start of the year exchanges Gemini and Kraken have settled charges with the SEC and the NYDFS halted the issuance of BUSD — a dollar-pegged token that carries Binance branding and is the third-largest of its kind in the crypto market.
In its filing late on Wednesday, the SEC said it was formally investigating whether Voyager violated anti-fraud, registration and other federal securities laws.
The agency also warned that part of Binance US’s rescue plan for Voyager, which involves distributing Voyager’s own crypto token to creditors, may constitute the sale of an unregistered security. The SEC also said Binance US could be an unregistered national securities exchange.
Binance US has been seeking to persuade US regulators to approve the deal, which is also being reviewed by the Committee on Foreign Investment in the US (Cfius), a panel that reviews certain transactions involving foreign investment in the country for potential security risks.
The SEC also cited media reports of US investigations into Binance US and its links with Binance, the international exchange led by chief executive Changpeng Zhao.
Zhao has long insisted its US affiliate is an independent company. However, links between the two exist. Zhao is the ultimate beneficial owner behind Binance US and the US affiliate has used the same political lobbyists as the sprawling international operation.
In its latest filing, the SEC said the proposed deal failed to adequately describe whether third parties “including Binance US affiliates or foreign persons or entities” will have access to customer wallets.
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The SEC, which had previously warned it did not have enough information on the deal to approve it, said that “regulatory actions” into Binance and the international Binance exchange could make the rescue deal “impossible to consummate”.
Binance US did not immediately respond to a request for comment but told the Financial Times earlier this month that the deal “continues to move forward with all the necessary review processes”.
In a separate filing, the NYDFS alleged that Voyager onboarded customers in New York and “thus illegally operated a virtual currency business in the state without a license”. The regulator added that the proposal “unfairly discriminates” against New York customers by delaying their recovery compared with other creditors.
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