Voyager Digital’s proposed sale to Binance draws trustee objection

By Sarah Lizee

Olympia, Wash., Jan. 4 – Voyager Digital Ltd.’s motion seeking approval to sell its assets to Binance US (BAM Trading Services Inc.) drew an objection from Region 2 U.S. trustee William K. Harrington, according to court documents filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

Harrington also objected to the company’s motion seeking a combined hearing on confirmation of a Chapter 11 plan and approval of a related disclosure statement.

Voyager had previously planned to sell its assets to FTX, before FTX’s descent into bankruptcy. Now, Voyager wants to sell the assets to Binance. The sale is at the heart of the company’s Chapter 11 plan.

The company is asking the court to grant the motions on shortened notice.

Harrington said that while he understands that the debtors’ financial condition limits their options, issues surrounding the proposed replacement purchaser call into question the feasibility of both the proposed sale and the plan on which the sale is based.

“Given the debtors’ recent unpleasant experience with FTX US, the court should not countenance their attempt to rush headlong into another asset purchase agreement without sufficient evidence of due diligence and without affording parties-in-interest a full and fair opportunity for due deliberation,” the U.S. trustee said.

Harrington said the asset purchase agreement and the disclosure statement lack transparency and contain little information beyond vague statements regarding the debtors’ purported risk assessment regarding Binance’s financial condition, its ability to close the sale and its ability to protect customer assets.

Unlike a traditional sale where creditors and customers look to the proceeds of the sale for their intended recoveries, any future recoveries here will be entirely dependent on the future viability of Binance, as customer holdings are, in large part, simply being transferred to Binance’s platform, the U.S. trustee explained.

Additionally, the debtors can’t complete the sale unless Binance gets money transmitter licenses from four states, as Voyager won’t be able to transfer the customers’ cryptocurrency to its platform without those licenses.

If Binance doesn’t get the licenses within six months after the sale closing date, Binance will convert any coins it is holding into dollars and transfer those dollars to the debtors.

While the regulatory process proceeds, Binance would have total control over the cryptocurrency of Voyager’s customers for up to six months before those customers would gain access to that cryptocurrency.

“The APA motion contains no explanation as to why the long-suffering customers, who have not had access to their accounts since before this case was commenced, should be forced to wait for such an extended period to regain access to their cryptocurrency,” Harrington said.

The motion also doesn’t describe the security protocols under which Binance proposes to protect the customers’ cryptocurrency it is to hold.

The U.S. trustee said Voyager’s customers can’t make an informed decision on the purchase agreement or the plan because the fate of their VGX tokens is unclear.

As previously reported, Binance has agreed to assume defined liabilities, make a cash payment of $20 million, pay the seller expenses and credit coins to users’ accounts.

The bid is valued at $1.022 billion based on the fair market value of Voyager’s cryptocurrency portfolio at a to-be-determined date in the future plus the $20 million incremental value.

Voyager’s claims against Three Arrows Capital will remain with the estate, according to a press release. Any future recovery on these and other non-released claims will be distributed to the estate’s creditors.

A hearing on the asset purchase agreement is scheduled for Jan. 10.

Voyager Digital is a cryptocurrency broker based in New York. The company filed bankruptcy on July 5 under Chapter 11 case number 22-10945.

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