Over the past year, a series of court cases have hit the crypto industry. Bankruptcy, liquidity issues and fraud have brought the industry under the microscope of regulators around the world.
Former cryptocurrency brokerage Voyager Digital, Alameda Research – the investment arm of FTX – and cryptocurrency exchange Binance were among the top entities dealing with the US Securities and Exchange Commission in the battle over assets and funds due.
As the new year dragged on, many of these cases continued. Here’s a brief roundup of the current status of some of the industry’s most pressing legal battles.
It all started with the bankruptcy of Voyager
The situation around Voyager Digital started long before FTX’s liquidity crunch came to light. On July 5, 2022, the company filed for bankruptcy in its initial attempt to “restore value” to more than 100,000 customers who have lost millions in funds in the hands of the crypto broker.
Nearly a month after filing for bankruptcy, we learn that Voyager had ‘deep ties’ at Alameda Research. Alamada was also Voyager’s largest shareholder, with an initial 11.56% stake in the company after two investments totaling $110 million.
The auction for Voyager assets began September 13, which saw some of the industry’s major players vying for their share of what was left of the company. This included people like Binance, CrossTower and FTX.
In the end the the auction was won by FTX through a $1.4 billion offer on the assets of the company. 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 in the Voyager-Binance.US offering.
However, at the end of October, Texas prosecutors objected to Voyager auction and opened an investigation into FTX for potential securities violations.
The fall of FTX
Although before any deal was finalized, the crypto industry received one of the biggest bombshells of the year when FTX, FTX US and Alameda all announced the filing for the Chapter 11 bankruptcy in the United States, as well as the resignation of former CEO and co-founder Sam Bankman Fried on November 11.
This incident changed the trajectory of the entire industry with a domino of companies impacted by their proximity to fallen exchange.
As part of our goal of transparency on this week’s market events, the Genesis Derivatives business currently has approximately $175 million in funds locked in our FTX trading account. This has no impact on our market making activities.
— Genesis (@GenesisTrading) November 10, 2022
It was after this collapse of the ecosystem that the SEC began to question its oversight strategies for the crypto industry. Now FTX’s offer for Voyager was off the table and FTX itself was also put into play.
At the start of the liquidity crunch, Binance Changpeng (CZ) co-founder and CEO Zhao was the first to release a reserve proof concept post FTX. The exchange even played with the acquisition of FTX, but ultimately did not result in the deal.
Nevertheless, around December 19, it was revealed that Binance.US reportedly close to acquiring Voyager Digital assets for approximately $1 billion.
Shortly thereafter, on January 5, the The SEC filed an objection to the acquisition of Binance.US because they wanted to see more details included in the billion dollar agreement between the two entities.
The SEC is basically objecting on the grounds that Binance US couldn’t have this size of assets without some annoying dealings (likely with the parent company)
Which would mean a mix of the American entity. So if Binance fights it, they risk being exposed in the US… https://t.co/9wW6eRTol7
— Adam Cochran (adamscochran.eth) (@adamscochran) January 4, 2023
Although the SEC ad Texas state legislators both opposed the Binance.US deal, an investigation published in court documents found that 97% of Voyager customers surveyed favorable to the restructuring plan.
On March 7, bankruptcy judge Michael Wiles granted approval of the agreement, as he said, the case could not be put into an “indefinite deep freeze” while regulators pinch the issues. However, the next day the ping-pong game continued as the US Department of Justice appealed against the approval.
Alameda back on stage
Meanwhile, on January 30, Alameda Research has filed a lawsuit against Voyager Digital for $446 million, claiming Voyager “knowingly or recklessly” funneled customer funds to Alameda.
Following the opening of this lawsuit on February 6, Voyager’s lawyers served a subpoena at SBF, with Alameda CEO Caroline Ellison, FTX Co-Founder Gary Wang, and FTX Product Manager Ramnic Arora.
Then on February 19, Voyager’s creditors served SBF with a subpoena appear in court for a “remote deposition”.
On March 8, court documents revealed that Delaware Bankruptcy Judge John Dorsey had approved that Voyager Digital will set aside $445 million in light of Alameda’s lawsuit. The next day, Alameda revealed that he 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 lawmakers and regulators in the United States is ongoing.