By Michael Scott
Texas regulators expressed pessimism about Binance US’s offer of $1B to Voyager Digital. The February 28 filing by the Texas regulators doubted the autonomy of Binance US from Binance Holdings Ltd. The submission before the court alleged Binance US engaged in illegal staking services.
Objections Hinged on Illegal Staking
The Friday filing by the attorney representing Texas regulators before the court indicated that Binance US’s offer to acquire bankrupt Voyager hinged on the court ruling on the $445m claimed by Alameda Research.
The filing by the attorney representing securities and banking agencies drawn from Texas downplayed the viability of the $1 billion deal. The regulators submitted that liquidating the assets would offer a better value since the would-be-buyer, Binance US would violate the securities laws through the illegal staking program.
Alameda Clawback on Loan Repayment Makes Binance US Deal Unviable
The Friday filing indicated that the court to support Alameda Research’s claim on the $445 loan would shred the recovery from 51% to roughly 25%. The Texas agencies argued that such would reduce the recovery. In support, New Jersey securities regulators indicated that such would lower limits than the offer that general unsecured claimants would attain in the Chapter 7 liquidation.
Voyager lawyers submitted that the Binance US deal featured critical creditor support disputed by the Texas regulatory agencies.
The Friday filing argued that Texas agencies were inadequately notified of the inherent risks from the Alameda Research claim. The agencies submitted that the parties failed to recognize the vulnerability of the deal to the FTX trading affiliate winning the clawback claim on the repayments to loans before the bankruptcy filing.
Binance US Accused of Dishonest Submissions
The Texas regulators supported quashing the $1.02 billion deal as parties failed to warn customers of the possible transfer of their private data to overseas jurisdictions considered under-regulated.
Filing to New York’s Southern District court questioned the viability of the Binance business model. Documents submitted by the Texas Securities Board portrayed the staking program of the would-be buyer as constituting an illegal securities offering.
The enforcement director Joe Rotunda echoed the argument conveyed by the US Securities and Exchange Commission (SEC) in its action against the Kraken crypto exchange. He added that the SEC found the staking-as-a-service an illegal filing to impose a $30 million fine to the Francisco-based exchange. The enforcement would extend by terminating the staking service.
Objections to Binance US $1.02B Deal
The documents annexed to the submission before the bankrupt court on Friday dismissed previous assertions by Binance US. The filing disclosed Binance US dishonesty through an affirmative representation to its customers alleging seeking a Texas license.
The filing dismissed the Binance US application for the State Securities Board license. Also, Binance US would abandon the license application sought from the Department of Banking. Instead, the filing discloses that Binance failed to furnish sufficient financial information.
February 24 warned that the term Voyager customers must sign would grant Binance.com a backdoor permit to operate in the US despite previous assertions ruling out dealing with the customers.
The filing by Texas regulators echoes objections submitted by the Federal Trade Commission (FTC) and SEC. The two regulatory agencies initiated a probe claiming Voyager perpetrated deceptive marketing before the bankruptcy filing in July. The additional filing by Texas regulators complicates the viability of Binance US $1.02 billion deal as the initial hearing is set for March 2.
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