Voyager Digital Shielded from SEC Fines Over Bankruptcy Token Issuance, Says US Judge
Bankruptcy judge Michael Wiles has stated that the United States Securities Exchange Commission (SEC) cannot impose fines on executives linked to Voyager Digital if the company issues bankruptcy tokens to reimburse affected customers.
This decision was made during hearings concerning Voyager’s plan to sell $1 billion of assets to Binance.US and issue a repayment token, which the SEC argued would be an unregistered security offering.
The SEC also objected to a legal protection that would prevent any U.S. agency from bringing claims against individuals involved in Voyager’s restructuring, provided that the court approves the bankruptcy plan. Therefore, executives and restructuring advisers involved in Voyager’s bankruptcy will be protected from legal action if they carry out the bankruptcy plan.
According to a Bloomberg report on March 6, the SEC criticized the legal protections in Voyager’s bankruptcy plan, calling them “extraordinary” and “highly improper.”
However, Wiles disagreed and stated that granting the SEC such power would create an atmosphere of uncertainty and fear for those involved in the transaction, asking how a court proceeding could function with such a suggestion.
On the other hand, SEC lawyer Therese Scheuer argued that the protections were too broad and could allow Voyager employees and lawyers to violate securities laws. Following a discussion, Voyager’s lawyers agreed to limit the scope of the legal releases.
It is important to note that Voyager Digital filed for bankruptcy on July 5 with the aim of reorganizing the company and providing value to more than 100,000 affected customers.
A restructuring plan was proposed on December 19 to bring Voyager out of Chapter 11 bankruptcy, which involved the sale of its assets to Binance.US for $1.02 billion, the highest and best offer at the time.
However, the SEC raised objections to the sale on February 22, citing concerns that certain aspects of the plan could violate securities laws.
The regulator was criticized in a court hearing on March 2 for providing unclear reasons for the objection.
A court filing on February 28 revealed that 97% of the 61,300 Voyager account holders who voted were in favor of the proposed Binance.US restructuring plan.