After a tumultuous year in crypto, court cases have inevitably followed. Bankruptcy, liquidity issues and fraud have caused the industry to fall 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 ended up in the crosshairs of the United States Securities and Exchange Commission (SEC) in battles over assets and owed funds.
As 2023 trundles on, so too have many crypto court cases. Here is a brief round-up 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 before the FTX liquidity crisis came to light. On July 5, 2022, the company filed for bankruptcy, initially attempting to “return value” to over 100,000 customers who had lost millions.
Nearly a month after its bankruptcy filing, it was revealed that Voyager had “deep ties” to Alameda Research. Alamada was also the largest stakeholder in Voyager, with an 11.56% stake in the company after two investments totaling $110 million.
The auction for Voyager’s assets began on Sep. 13, which saw some of the industry’s major players vying for their share of what was left of the company. This included the likes of Binance, CrossTower and FTX.
Related: Gensler’s approach toward crypto appears skewed as criticisms mount
FTX prevailed in the auction after a $1.4 billion bid on the company’s assets. At the time, it was said that Voyager customers could recover 72% of their assets after the FTX deal — similar to current statements by some involved with Binance.US’s bid to acquire Voyager.
However, in late October, prosecutors in Texas objected to the Voyager auction and launched an investigation into FTX for potential securities violations.
The fall of FTX
Before any deals were finalized, the crypto industry received one of the biggest bombshells of the year when FTX, FTX US and Alameda Research filed for Chapter 11 bankruptcy in the U.S., with the resignation of co-founder and former CEO Sam Bankman-Fried following soon after, on Nov. 11.
This incident sent shockwaves through the entire industry, with a domino of companies affected by their proximity to FTX.
As part of our goal in providing transparency around this week’s market events, the Genesis derivatives business currently has ~$175M in locked funds in our FTX trading account. This does not impact our market-making activities.— Genesis (@GenesisTrading) November 10, 2022
After this dramatic collapse, the SEC began questioning its oversight strategies for the crypto industry. FTX’s bid for Voyager was off the table, and FTX itself was also up for grabs.
Binance steps in
At the onset of the liquidity crisis, Binance’s co-founder and CEO Changpeng “CZ” Zhao was the first to come out with a proof-of-reserves concept post-FTX. The exchange even toyed with acquiring FTX, though ultimately did not proceed.
Around Dec. 19, it was revealed that Binance.US was set to acquire Voyager Digital assets for roughly $1 billion.
Related: US accounting watchdog warns investors about proof-of-reserves reports
Shortly after, on Jan. 5, 2023, the SEC filed an objection to the Binance.US acquisition on account of wanting to see more details included in the billion-dollar deal between the two entities.
SEC basically objecting on the grounds that Binance US couldn’t have this size of assets without some untoward dealing (likely with parentco)
Which would mean a commingling of the US entity. So if Binance fights it they risk US exposure… https://t.co/9wW6eRTol7— Adam Cochran (adamscochran.eth) (@adamscochran) January 4, 2023
Although the SEC and lawmakers in Texas both opposed the Binance.US deal, a survey released in court documents revealed that 97% of surveyed Voyager customers favored the restructuring plan.
On March 7, bankruptcy judge Michael Wiles approved the deal and said the case couldn’t be put into an “indeterminate deep freeze” while regulators nitpick problems. However, the following day the game of ping-pong continued as the U.S. Department of Justice filed an appeal against the approval.
Alameda back on the scene
Meanwhile, on Jan. 30, Alameda Research opened a lawsuit against Voyager Digital for $446 million, claiming that Voyager “knowingly or recklessly” channeled customer funds to Alameda.
Following the initiation of this lawsuit, on Feb. 6, Voyager’s lawyers served a subpoena to Sam Bankman-Fried, along with former Alameda CEO Caroline Ellison, FTX co-founder Gary Wang and Ramnic Arora, head of product at FTX.
On Feb.19, Voyager creditors served Bankman-Fried with a subpoena 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 interest 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 U.S. is ongoing.