Binance US, Alameda, Voyager Digital and SEC — the ongoing court saga

Over the last year, a series of court cases have struck the crypto industry. Bankruptcy, liquidity issues and fraud have caused the industry to fall under the microscope of regulators around the world.

The former cryptocurrency brokerage company Voyager Digital, Alameda Research - the investment arm of FTX- and cryptocurrency exchange Binance have been among some of the major entities dealing with the United States Securities and Exchange Commission in the battle over assets and owed funds.

As the new year has continued on, so have many of these cases. Here is a brief round-up of the current status of some of the industry’s most pressing legal battles.

It all started with the Voyager bankruptcy

The situation around Voyager Digital began way before the FTX liquidity crisis came to light. On July 5, 2022, the company filed for bankruptcy in its initial attempt to “return value” to more than 100,000 customers who lost millions in funds at the hands of the crypto broker. 

Nearly a month after its bankruptcy filing, it became known that Voyager had “deep ties” to Alameda Research. Alamada was also the largest stakeholder in Voyager, with an initial 11.56% stake in the company after two investments that totaled $110 million. 

The auction for Voyager’s assets began on Sep. 13, which saw some of the industry’s major players vying for their share of what was left of the company. This included the likes of Binance, CrossTower and FTX. 

Related: Gensler’s approach toward crypto appears skewed as criticisms mount

Ultimately the auction was won by FTX through a $1.4 billion bid on the company’s assets. At the time, it was said that Voyager customers could recover 72% of their assets via the FTX deal - similar to what is currently being said by some involved with the Voyager-Binance.US bid. 

However, in late October, prosecutors in Texas objected to the Voyager auction and began an investigation on FTX for potential securities violations.

The fall of FTX

Though before any deals were finalized, the crypto industry received one of the biggest bombshells of the year when FTX, FTX US and Alameda all announced filing for Chapter 11 bankruptcy in the U.S., along with the resignation of former CEO and co-founder Sam Bankman Fried on Nov. 11. 

This incident changed the trajectory of the entire industry with a domino of companies affected by their proximity to the fallen exchange. 

As part of our goal in providing transparency around this week’s market events, the Genesis derivatives business currently has ~$175M in locked funds in our FTX trading account. This does not impact our market-making activities.

It was after this ecosystem collapse that the SEC began to question its oversight strategies for the crypto industry. Now, FTX’s bid for Voyager was off the table and FTX itself was also put up for grabs. 

Binance steps in

At the onset of the liquidity crisis, Binance’s co-founder and CEO Changpeng (CZ) Zhao was the first to come out with a proof-of-reserve concept post-FTX. The exchange even toyed with acquiring FTX, though ultimately did not go through with the deal. 

Nonetheless, around Dec. 19, it was revealed that Binance.US would be set to acquire Voyager Digital assets for around $1 billion. 

Related: US accounting watchdog warns investors about proof-of-reserves reports

Shortly after, on Jan. 5, the SEC filed an objection to the Binance.US acquisition on account of wanting to see more details included in the billion-dollar deal between the two entities.

SEC basically objecting on the grounds that Binance US couldn’t have this size of assets without some untoward dealing (likely with parentco)

Which would mean a commingling of the US entity. So if Binance fights it they risk US exposure… https://t.co/9wW6eRTol7

Although the SEC and lawmakers in the state of Texas both opposed the Binance.US deal, a survey released in court documents revealed that 97% of surveyed Voyager customers favored the restructuring plan. 

On March 7, bankruptcy judge Michael Wiles granted the deal approval, as he said the case couldn’t be put into an “ indeterminate deep freeze” while regulators nitpick problems. However, the following day the game of ping-pong continued as the U.S. Department of Justice filed an appeal against the approval.

Alameda back on the scene

Meanwhile, back on Jan. 30, Alameda Research opened a lawsuit against Voyager Digital for $446 million, claiming that Voyager “knowingly or recklessly” channeled customer funds to Alameda.

Following the initiation of this lawsuit, on Feb. 6, Voyager’s lawyers served a subpoena to SBF, along with Alameda CEO Caroline Ellison, FTX co-founder Gary Wang and Ramnic Arora, head of product at FTX.

Then on Feb.19, Voyager creditors served SBF with a subpoena to appear in court for a ‘remote deposition.’

On March 8, court documents revealed that Delaware bankruptcy judge John Dorsey approved that Voyager Digital will set aside $445 million in light of Alameda’s lawsuit. The next day, Alameda revealed that it plans to sell its remaining interest in Sequoia Capital to an Abu Dhabi fund for $45 million.

The situation between these three entities in relation to lawmakers and regulators in the U.S. is ongoing. 

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