The U.S. Securities and Exchange Commission (SEC) and New York’s top financial regulator have opposed crypto exchange Binance.US’s $1 billion deal to buy bankrupt crypto lender Voyager, the latest in a string of U.S. regulatory moves against crypto firms.
The Voyager deal may violate laws on the unregistered offer and sale of securities, the SEC said in a filing on Wednesday.
The SEC’s objection also cited reports of U.S. investigations into Binance.US and the global Binance crypto exchange, of which Binance.US is a purportedly independent partner. “Regulatory actions” could mean the deal may become “impossible to consummate,” it said.
New York’s top financial regulator and New York Attorney General Letitia James also objected to the deal in filings on Wednesday. The New York Department of Financial Services said that Voyager “illegally operated a virtual currency business within the state without a license.”
In a statement, a Binance.US spokesperson said on Thursday the company would “work with relevant parties to provide any requested information, as Binance.US customer assets always remain on the platform, are held on a 1:1 basis and are fully reserved.”
A lawyer representing Voyager Digital did not immediately respond to requests for comment.
The SEC cited concerns over the security of assets at Binance.US, saying the planned deal did give enough information on whether third parties, “including Binance.US affiliates or foreign persons or entities,” would have access to the keys for customers’ digital wallets.
The deal also failed to detail what safeguards were in place “to ensure that customer assets are not transferred off the Binance.US platform,” the SEC objection said.
Reuters reported on Feb. 16, citing banking records and company messages, that the global Binance exchange had secret access to a bank account belonging to Binance.US, and transferred large sums of money from the account to a trading firm managed by Binance CEO Changpeng Zhao.
Binance.US called the reporting “outdated,” saying that “only Binance.US employees have access” to its bank accounts. It later confirmed that the trading firm operated as a market maker on its platform.
The objections come as the SEC targets companies offering a range of crypto services, from stablecoins to “staking.” It told the issuer of Binance’s stablecoin, Paxos Trust Company, that it should have registered the product as a security and is considering taking action against it, Paxos said last week.
The U.S. Justice Department is investigating the global Binance exchange for possible money laundering and sanctions violations, Reuters reported in December. A top Binance executive last week told the Wall Street Journal that Binance expected to pay penalties to resolve the investigations.
Voyager filed for bankruptcy in July, one of a string of crypto companies caught in the 2022 collapse in token prices.
Voyager received initial court approval for the deal last month. A U.S. national security review could delay or block the deal, the U.S. Committee on Foreign Investment in the United States said in a court filing in December.
