A U.S Bankruptcy Judge has ruled that executives and advisers involved in the bankruptcy of Voyager Digital Ltd cannot be penalized for creating a new cryptocurrency that would aid in repaying customers of the failed digital asset lender.
The decision highlights the tension between efforts to rehabilitate struggling crypto firms and the US Securities and Exchange Commission’s (SEC) push for tighter regulation. SEC lawyers have opposed the legal protection given to executives and restructuring advisers, which shields them from lawsuits for implementing court-approved bankruptcy plans.
During a debate over Voyager‘s plan to issue a new cryptocoin and sell itself to Binance.US, the SEC argued that the proposal would likely violate federal law, as the new coin is an unregistered security and Binance.US is operating an unregulated securities exchange. Voyager lawyers have agreed to narrow the legal releases, but the SEC and a few Voyager customers are still opposing the sale and payout plan for different reasons.
The bankruptcy case is identified as Voyager Digital Holdings Inc., 22-10943, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
Voyager must obtain court approval for its sale to Binance.us by March 6 or risk the deal being canceled. The legal protections do not preclude the SEC or other regulatory agencies from taking legal action to shut down Binance.us or prevent Voyager from issuing the cryptocoin. However, Judge Wiles emphasized that targeting individuals for their work on the proposals would be unjustified.
