The United States Securities Exchange Commission (SEC) won’t be allowed to fine executives involved in Voyager Digital should it end up issuing bankruptcy tokens to help repay impacted customers, bankruptcy judge Michael Wiles has said.
The comments from Wiles came on Mar. 6, the third day of hearings regarding a plan by Voyager to issue a repayment token and sell $1 billion of assets to Binance.US.
The SEC earlier argued that the repayment token would constitute an unregistered security offering, while Binance.US is operating an unregulated securities exchange.
In a supplemental objection statement, it also objected to a legal protection which stated that no U.S. agency, including the SEC, will be able to bring “any claim against any Person on account of or relating to the Restructuring Transactions.”
Essentially, this means that executives and restructuring advisers involved in Voyager’s bankruptcy would be shielded from lawsuits if they implement the bankruptcy plan, as long as it is court-approved.
The SEC’s Mar. 6 supplemental objection statement to Voyager’s Chapter 11 Restructuring Plan. Source: Stretto.
While the SEC described these provisions as “extraordinary” and “highly improper,” Wiles explained that giving the SEC such authority would “leave a sword hanging over the heads of anybody who’s going to do this transaction,” according to a Mar. 6 Bloomberg report, stating:
“How can a bankruptcy case or any court proceeding function with that kind of suggestion?”
SEC lawyer Therese Scheuer argued however that the legal protections are so broad that Voyager employees and lawyers would have permission to violate securities laws. After debate, Voyagers lawyers agreed to narrow the scope of legal releases, according to Bloomberg.
The court has been considering a restructuring plan to bring Voyager out of Chapter 11 bankruptcy which would first announced on Dec. 19.
The plan would see crypto exchange Binance.US acquire its assets for $1.02 billion — an option Voyager said at the time represented the “highest and best bid for its assets.”
