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SEC Staff Say Binance.US Offers Unregistered Securities, Claims Lawyer

2 mins
Updated by Ryan James
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In Brief

  • An SEC attorney argued at a Voyager bankruptcy hearing that Binance.US offers unregistered.
  • The SEC has objected to the acquisition of Voyager by Binance.US, alleging that any token distribution after the buyout would constitute an unregistered securities offering.
  • According to Judge Michael Wiles, the SEC has not provided any substantive evidence to back up its claims.
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U.S. Securities and Exchange Commission lawyer William Uptegrove asserted in a Voyager bankruptcy hearing that SEC staff believe Binance.US is running an unregistered securities exchange.

He added that staff agrees that Voyager’s VGX token offering and sale bear the hallmarks of a securities transaction.

Voyager Bankruptcy Judge Refuses Private Discussion With the SEC Lawyer

Uptegrove also affirmed that his statements did not represent that of other SEC commissioners. These include chair Gary Gensler and pro-crypto commissioner Hester Peirce.

Bankruptcy Judge M. Wiles is deciding whether to approve a plan agreed upon by Voyager creditors to sell the bankrupt firm’s assets to Binance.US.

Wiles actively opposed a decision by the SEC to block the acquisition amid a lack of evidence. When asked by the SEC’s attorney to meet privately regarding the SEC’s objection, he argued that any SEC argument underpinning its opposition to the Binance deal is fit for consumption in a public court.

Uptegrove responded that the SEC’s investigations are private and complex while, at the same time, neither confirming nor denying any impending enforcement actions.

The American Bar Association’s code of professional conduct forbids ex parte communication regarding substantive matters. Rules also prohibit Judge Wiles from investigating any claims independently. He would also have to notify the opposition if Uptegrove disclosed any material information privately.

Binance.US said they were disappointed that the lawyer would accuse the company without a list of offending cryptocurrencies.

Three U.S. Senators have requested Binance.US to disclose financial information and compliance policies to prove the legitimacy of its business.

SEC Wants to Say I Told You So, Judge Says

Judge Wiles had made it clear on previous occasions that he viewed SEC’s objection as wanton and lacking substance.

“You come here and tell me … that I should stop everybody in their tracks because you might have an issue. It’s kind of a weird objection,” Wiles said.

The SEC had earlier alleged that the distribution of Voyager’s assets “may violate” securities laws. The agency also said that money laundering and corruption allegations against Binance.US could make the deal “impossible to consummate.”

SEC Binance.US
SEC’s Claims Around Impossibility of Acquisition | Source: SEC

The SEC’s filing’s phrasing contains speculative, forward-looking language that Wiles had previously asserted did “nothing” to change his mind.

“I get the feeling that this objection has been made as a kind of cover, so you can say later that we’ll see we raised these issues,” he said at a previous hearing.

In effect, the SEC asserts that the distribution of Voyager assets to creditors after the Binance.US acquisition could amount to an unregistered security offering.

SEC Objection
SEC Claims on Distribution | Source: SEC

The SEC makes the claim without recommendations that Binance.US could follow to mitigate such an issue before or after the acquisition.

Peirce had previously criticized the SEC’s regulation method, which involves cutting off U.S. customers from what the SEC deems are securities instead of helping to provide a clear registration scheme.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...