Judge’s Voyager ruling pushing US authorities to act against Binance

The U.S. judge allowing Binance.US to acquire Voyager Digital’s assets may be pushing federal authorities to accelerate criminal and civil actions against the international Binance.

Last week, Judge Michael Wiles dismissed last-ditch efforts by the U.S. Department of Justice (DoJ) to pause Binance.US’s acquisition of the assets of bankrupt digital asset lender Voyager. Wiles, who’d approved the acquisition the week prior, said any further delay would result in “quite significant and immediate” harm to Voyager’s customers, whose assets have been frozen since Voyager filed for bankruptcy protection last July.

Part of the DoJ’s objections to the deal—alongside similar protests filed by the U.S. Securities and Exchange Commission and the New York Department of Financial Services—focused on a clause in the acquisition agreement that the DoJ argued was vague enough that it could effectively immunize Voyager execs from prosecution if they were found to have committed fraud, tax or securities violations.

Wiles rejected this argument, stating that the immunity he granted applies only to “things that I authorized during the course of the bankruptcy case” and the DoJ had “strained to find potential ambiguities in these terms.” Wiles added that “the confirmation order will require certain actions to be taken in the future. Parties who act under the direction of that Order are entitled to know that they are not being ordered (in effect) to incur liabilities for having done so.”

Wiles noted that the immunity language in the order was narrower than what the Debtors had proposed on March 2 and Wiles agreed that this earlier language was “overreaching and was made without adequate notice.” Wiles further clarified that the immunity granted “do[es] not prohibit any regulatory action, including actions to stop the cryptocurrency sales and distributions that the plan contemplates.”

Giving the feds no choice

The proposed deal would see Binance.US acquire possession of over $1 billion worth of Voyager customers’ assets. Binance.US would be required to distribute these assets to Voyager customers via newly created accounts on the cryptocurrency exchange.

The SEC believes Voyager’s in-house VGX token is an unregistered security and that Binance.US is also dealing in unregistered securities. The DoJ has warned that the execs involved might have to “take their chances” regarding potential prosecution for violating federal laws.

Critics have noted that Binance.US is acquiring a highly valuable customer database in exchange for the $20 million that it’s adding to the value of the deal. Binance.US is evidently hoping that Voyager customers won’t immediately seek the withdrawal of their assets but will continue to let them roll in its crypto casino.

Fears are high that his database will end up in the hands of Binance.com, particularly given the deluge of evidence that Binance.com is in full control of Binance.US, despite facile claims to the contrary.

The recent collapse of California’s Silvergate Bank revealed that, over a three-month period in 2021, the international site withdrew over $400 million from bank accounts ostensibly under Binance.US control and transferred the funds to a company controlled by Binance.com founder Changpeng ‘CZ’ Zhao.

Earlier this month, when the federal authorities’ objections to the Voyager deal was made public, CZ responded by tweeting “Maybe we should pull out?” Seems even CZ has difficulty sticking to the story that Binance.US is an ‘independent entity’ that only licenses the Binance brand and technology, which should mean that ‘we’ had nothing to do with the deal.

Judge Wiles may have allowed the Voyager deal to proceed, but he’s also left the DoJ/SEC with few remaining options. If the feds truly want to stop this deal in its tracks, it seems they will have to end their internal debates about timing and drop indictments against Binance, CZ and the whole Binance criminal crypto enterprise.

Typing loud and saying nothing

Meanwhile, Binance continues to thumb its nose at U.S. efforts to ascertain the precise extent of the exchange’s criminality. Last week, Binance issued a non-response-response to a bipartisan group of U.S. senators’ public request for both the international and U.S.-licensed exchanges’ balance sheets, records involving U.S. customers and internal communications discussing CZ’s efforts to avoid complying with U.S. laws and regulations.

The letter pulls zero punches, tartly observing that “what little information about Binance’s finances is available to the public suggests that the exchange is a hotbed of illegal financial activity that has facilitated over $10 billion in payments to criminals and sanctions evaders.”

The letter’s many allegations include Binance’s “laughably weak anti-money laundering compliance program,” the company’s proclivity for disclosing “vanishingly little information” to regulators, and the “reality” that CZ controls Binance.US as a “de facto subsidiary” of Binance.com.

The senators note that CZ’s claims of the independence of Binance.US are “eerily similar to claims Sam Bankman-Fried made regarding the distinction between FTX US and FTX” before both those entities were exposed as frauds and forced into bankruptcy last November. This in itself could prove all the ammunition that federal authorities require to scupper the Voyager deal.

After several weeks of silence, Bloomberg reported that Binance issued a 14-page letter signed by chief strategy officer Patrick Hillmann that provided little of the information requested by the senators. Instead, Hillmann offered the same tired assertions that Binance suffers from “misconceptions.” These apparently include Binance’s own internal admissions that Binance.US is a compliance fig-leaf intended to distract U.S. regulators from rampant criminality at the international site.

Grift cards are go!

Regulators around the globe continue to cast a jaded eye at Binance’s operations, leading a growing number of more traditional fintech firms to avoid guilt by association. Earlier this month, U.K. payment processor Paysafe cited a tightening regulatory environment in announcing the suspension of sterling deposits to or withdrawals from Binance.

Last month, U.S. regulators forced New York-based Paxos Trust to halt further issuance of the Binance USD stablecoin, citing “several unresolved issues related to Paxos’ oversight of its relationship with Binance.” Rival exchange Coinbase (NASDAQ: COIN) promptly announced it would suspend BUSD trading, forcing Binance to hastily rearrange the deck chairs on its stablecoin Titanic.

It’s not all bad news for CZ. On Monday, Binance Italy announced that it had struck a deal with MrPay to make Binance Gift Cards available at 5,000 retail locations. Individuals can now buy Cards from physical outlets, then use the Cards to top up their Binance accounts. The Cards can be purchased with cash, but only “within the limits prescribed by the law,” so no worries about money laundering whatsoever. None. Seriously. Not at all. Unless you’re these fools.

I refuse to join any club that would have me as a member

Monday also saw Binance issue a blog post aimed at educating prospective employees on “reasons not to join Binance.” But first they offer some admittedly “grandiose” self-affirmation, including “the fact that we are at the bleeding edge of a chaotic and transformational moment in technological and financial history.”

See, the Binance folks are “students of evolution” and you too will be expected to “thrive in chaos.” If you’re not comfortable with “navigating ambiguity” or prefer having “clear, defined, articulated tasks,” Binance isn’t the place for you. It’s not for nothing that Binance lacks a clear, defined ‘place’ they call a headquarters.

As a “remote-first” organization, “long days and weird working hours are normal” but “you have the freedom to step away any time you’d like for that quick workout or much-needed nap.” Particularly during sudden crypto crashes, when thousands of Binance customers are furiously trying to withdraw funds or close short positions, but never mind… just hang out that ‘unscheduled maintenance’ sign and take five. In fact, take 10.

Binance prides itself on its “endless chase for accountability,” unless it involves answering questions from regulators, politicians or Interpol. While Binancians must be willing to take “a gut punch to the ego,” there’s absolutely no risk of taking a boot to the nads from overzealous regulators because Binance is never in one place long enough to ensure a good chance of connecting.

Binancians must also prize clarity and brevity in their communications. Look no further than CZ, who now appears to communicate solely using the number ‘4’. CZ claims ‘4’ is a stand-in for ‘FUD’ but it may also refer to how many hundreds of millions of dollars he transferred out of Binance.US bank accounts without the knowledge of Catherine Coley, the then-CEO of Binance.US.

This limited communication ethos also appears to apply to the r/binance subreddit, which has begun restricting users ability to post in favor of tightly controlled ‘Daily discussions.’ This is supposedly intended to reduce scams, which, given Binance’s checkered past, they are highly adept at identifying.

Bottom line: “If you’re risk-averse or uncomfortable with the uncertainty that comes with exploring uncharted territories, our culture is not a good fit for you. We’re trying to go where no one has gone before.” Typical Binance braggadocio… after all, lots of people have been to prison.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—a from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, Ethereum, 
FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.