The Securities and Exchange Commission has intervened in a deal that would see Binance US buy the assets of a bankrupt crypto lender, in a sign of US authorities stepping up their scrutiny over digital asset exchanges.
Wall Street regulators objected to Binance US’ proposed $1 billion acquisition of Voyager Digital assets, which went bankrupt last summer, as a sharp drop in token prices prompted the collapse of several once-prominent crypto companies led.
Binance, the world’s largest exchange for digital assets, and its global subsidiaries have come under increasing scrutiny from crypto investors and regulators after last year’s collapse of FTX cemented the crypto empire’s leadership in the industry.
The SEC’s objection to Binance’s US deal comes as the collapse of FTX raises concerns about opaque relationships between related crypto entities. Binance says its US subsidiary licenses its exchange technology but claims they are independent companies.
The crypto industry has endured a turbulent 12 months, culminating in the failure of marquee exchange FTX in November. The SEC’s objection to Binance US’ proposed deal with Voyager shows how regulators are stepping up scrutiny over the sector, even as many of the industry’s top assets remain unregulated.
The SEC said there was insufficient information to show how Binance US would “complete a transaction of this magnitude.” The regulator also found insufficient details about the nature of Binance US’s operations after the proposed acquisition, as well as how the debtors intended to secure client assets. The SEC said it expects Binance US attorney to file an updated disclosure.
A Binance US spokesman said a “careful review of the deal is to be expected and welcomed” and that Binance US will work with the relevant parties to provide any information requested. “We look forward to completing the transaction,” added the spokesman.
In a sign of how the crypto industry has come under increasing pressure in recent weeks, outflows from the main global Binance exchange reached $6 billion in a matter of days last month. Binance CEO Changpeng Zhao has tried to reassure customers by saying there is “no amount of withdrawals that would bring that [Binance] vacuum”.
Auditing firm Mazars — which previously produced “proof of reserves” reports for Binance — has also announced it is ceasing its operations in the crypto sector due to “the way these reports are understood by the public.”
Industry participants are also closely watching the situation at crypto broker Genesis, which halted withdrawals in its lending unit in November. It said this week it needed more time to find a solution to its financial difficulties.
The group owes around $900 million to customers of exchange Gemini – which Genesis used as a partner in its lending program. Cameron Winklevoss, co-founder of Gemini, accused Barry Silbert, chief executive officer of Genesis parent company Digital Currency Group, in an open letter on Monday of “malicious delaying tactics.” In response, Silbert said DCG tried to communicate with Gemini in late December but received no response.
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