Binance.US, Alameda, Voyager Digital and the SEC – the ongoing litigation

by · March 13, 2023

After a tumultuous year in crypto, litigation has inevitably followed. Bankruptcy, liquidity problems and fraud have brought the industry under the microscope of regulators worldwide.

Voyager Digital, the former cryptocurrency brokerage; Alameda Research, the investment arm of FTX; and cryptocurrency exchange Binance have all found themselves in the crosshairs of the United States Securities and Exchange Commission in battles over assets and owed funds.

As 2023 progresses, there have also been many crypto-lawsuits. Here’s a brief summary 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 long before the FTX liquidity crisis came to light. On July 5, 2022, the company filed for bankruptcy in its first attempt to “return value” to more than 100,000 customers who lost millions in funds at the hands of the crypto broker.

Almost a month after the 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 totaling $110 million.

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

Related: Gensler’s approach to crypto seems skewed as criticism mounts

In the end, the auction was won by FTX through a bid of $1.4 billion for the company’s assets. At the time Voyager customers were said to be able to recover 72% of their holdings via the FTX deal – similar to what is currently being said by some involved in the Voyager-Binance.US bid.

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

The fall of FTX

Although before any deals closed, the crypto industry received one of the biggest bombs of the year when FTX, FTX US and Alameda all announced filing for Chapter 11 bankruptcy in the US, along with the resignation of former CEO and co-founder Sam Bankman. Fried 11 Nov.

This event changed the trajectory of the entire industry with a domino of companies affected by their proximity to the fallen stock market.

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 lined up.

Binance steps in

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

Nevertheless, around December 19, it was revealed that Binance.US was going to buy Voyager Digital assets for around $1 billion.

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

Shortly after, on January 5, the SEC filed an objection to the acquisition of Binance.US due to its desire to see more details included in the billion dollar deal between the two entities.

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

On March 7, bankruptcy judge Michael Wiles approved the deal, saying the case could not be put into an “indefinite deep freeze” while regulators look for problems. The next day, however, the ping-pong game continued as the US Department of Justice appealed the approval.

Alameda back on stage

Meanwhile, on Jan. 30, Alameda Research filed a $446 million lawsuit against Voyager Digital, alleging that Voyager “knowingly or recklessly” funneled customer funds to Alameda.

Following the initiation of this lawsuit, on February 6, Voyager’s attorneys served a subpoena on SBF, along with Alameda CEO Caroline Ellison, FTX co-founder Gary Wang and FTX Chief Product Officer Ramnic Arora.

Then, on February 19, Voyager creditors served SBF with a summons 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 stake in Sequoia Capital to an Abu Dhabi fund for $45 million.

The situation between these three entities in relation to legislators and regulators in the United States is ongoing.