US Scrutiny Prompts Binance CEO To Consider Exiting Voyager Deal

The CEO of Binance, Changpeng "CZ" Zhao, expressed frustration on Twitter regarding a controversial deal to acquire bankrupt crypto lender Voyager Digital, saying he may consider walking away before reaffirming his support.

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Several regulators in the United States have objected to the tie-up since it was announced in December, stating that the deal would see Voyager sell its assets to Binance.US in a deal that was previously valued at $1 billion. Binance Holdings Ltd., the world's largest crypto trading platform, has been identified as being unlicensed to operate in the country and has established Binance.US as its own entity in 2019. According to the details outlined in the filing by regulators last month, Zhao remains the majority owner of both companies.

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“Maybe we should pull out of the deal? ” In a tweet, Zhao referenced another user's comment about Voyager. Binance.US's spokesperson said it "remains committed to the Voyager transaction," while Zhao confirmed in a follow-up tweet that he is still supportive of the deal if Binance is allowed to proceed.

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Zhao's tweet comes following a letter from US Senators representing both Democrats and Republicans that was sent to Binance CEO and Binance.US boss Brian Shroder, demanding that the companies provide a comprehensive accounting of their finances and efforts to maintain regulatory compliance.

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In a letter signed by Senators Elizabeth Warren, Chris Van Hollen, and Roger Marshall, it was alleged that Binance was an “extreme hotbed of illegal financial activity” that facilitated payments worth more than $10 billion to criminals and sanctions evaders. According to representatives for Binance and Binance.US, they would respond to the lawmakers' inquiries.

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Zhao, during a discussion on Twitter Spaces that took place on Friday, noted that he spends 80 to 90% of his time working with regulators and that he is devoted to these efforts. Despite the fact that there are many hostile regulators against us, there are many friendly regulators with us, he said.  

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While the US Department of Justice said in a filing to the judge overseeing the bankruptcy process late Friday that two provisions added by Voyager to its proposed Chapter 11 plan this week appeared to “prospectively immunize a series of transactions from the entire body of federal and state law,” the two provisions appear to be “prospectively immunizing a series of transactions from the entire body of federal and state law”.

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The US and its agencies were prohibited from alleging that restructuring transactions carried out by Voyager violated any rules enforced in the country, nor were they allowed to bring claims against anyone involved in them.

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“The release seeks to protect untold numbers of ‘Person[s]’, as well as the Debtors, from any and all liability in addition to the Debtors, which includes all areas of law enforcement, such as criminal or civil fraud, securities, environmental and tax, and others. According to Damian Williams, US attorney for the Southern District of New York, “This conduct associated with transactions which have not yet taken place is blatantly illegal,” according to the letter.

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Voyager's bankruptcy payout plan will be decided by a federal judge in the next few days, and the judge blasted the SEC in court on Thursday, accusing the agency of asking the crypto company to meet "impossible" requirements.

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As a result, regulators have asked US Bankruptcy Judge Michael Wiles to reject the bankruptcy plan unless the plan is clarified whether it might someday violate US securities laws as a result of the bankruptcy plan. According to Wiles, the regulators refuse to provide any guidance on how the plan and the Binance deal might violate federal laws if they go into effect. He appears to be ignoring the SEC's request based on his comments.

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“I get the impression that you made this objection to cover yourself,” Wiles told the US Justice Department's lawyers.

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The crypto market's downturn in 2022 left Voyager as one of several casualties, filing for bankruptcy in July of the same year after weathering losses caused by the collapse of the crypto hedge fund Three Arrows Capital, which Voyager had invested in. In November of last year, FTX announced that it had filed for bankruptcy as well after it was engaged in a deal to be purchased by the crypto exchange.

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Since FTX's failure, Binance has continued to dominate the crypto market, accounting for around 60% of the market in mid-February, according to CryptoCompare. The Securities and Exchange Commission, the Department of Justice, the Internal Revenue Service, and the Department of Justice, among others, have been investigating the company over the past several years.