Over the past year, a series of lawsuits have affected the crypto industry. Bankruptcies, liquidity problems and fraud have brought the industry under the scrutiny of regulators around the world.
Former cryptocurrency brokerage firm Voyager Digital, Alameda Research – the investment arm of FTX- and cryptocurrency exchanges Binance were among the main entities dealing with the US Securities and Exchange Commission in the fight for assets and owed funds.
As the new year rolls on, so do many of these cases. Here’s a quick summary of the current state of some of the industry’s most pressing legal battles.
It all started with the bankruptcy of Voyager
The situation around Voyager Digital began long before the FTX liquidity crisis was revealed. On July 5, 2022, the company filed for bankruptcy in an initial attempt to “return value” to over 100,000 customers who lost millions of funds at the hands of a crypto broker.
Nearly a month after filing for bankruptcy, Voyager was revealed to have “deep ties” to Alameda Research. Alamada was also Voyager’s largest shareholder, with an initial 11.56% stake in the company after two investments totaling $110 million.
Voyager’s asset auction kicked off on September 13, with some of the industry’s major players vying for their share of what was left of the company. This included companies like Binance, CrossTower, and FTX.
Related: Gensler’s approach to cryptocurrencies appears skewed as criticism mounts
In the end, the auction was won by FTX with a $1.4 billion bid for the company’s assets. At the time, it was said that Voyager clients could get back 72% of their assets through an FTX deal – similar to what some people involved in the Voyager-Binance.US deal are now saying.
However, in late October, Texas prosecutors objected to the Voyager auction and began investigating FTX for potential securities breaches.
Fall of FTX
Though before any deals were finalized, the crypto industry received one of the biggest bombshells of the year when FTX, FTX US and Alameda announced their US Chapter 11 bankruptcy filings, along with the resignation of former CEO and co-founder Sam Bankman. Fried November 11.
This incident changed the trajectory of the entire industry with the dominance of companies affected by the proximity of the collapsed stock exchange.
As part of our goal of providing transparency on market events this week, the Genesis derivatives business currently has approximately $175 million in locked funds in our FTX trading account. This does not affect our market making activity.
— Genesis (@GenesisTrading) November 10, 2022
It was after the collapse of the ecosystem that the SEC began to question its oversight strategies over the crypto industry. Now FTX’s Voyager bid was off the table, and FTX itself was up for grabs as well.
Binance steps in
At the beginning of the liquidity crisis, Binance co-founder and CEO Changpeng (CZ) Zhao was the first to introduce the concept of Proof of Reserve after FTX. The exchange even toyed with the acquisition of FTX, but in the end there was no transaction.
Nevertheless, around December 19, it was revealed that Binance.US intends to acquire the assets of Voyager Digital for approximately $1 billion.
Related: The US accounting watchdog warns investors against reports confirming reserves
Soon after, on January 5, the SEC filed an objection to the Binance.US takeover, seeking to see more details of the billion-dollar deal between the two entities.
SEC basically objects that Binance US cannot have assets of this size without some unforeseen deals (probably with parentco)
Which would mean mixing up an American entity. So if Binance fights this, they risk exposure to the US… https://t.co/9wW6eRTol7
— Adam Cochran (adamscochran.eth) (@adamscochran) January 4, 2023
Although both the SEC and Texas lawmakers opposed the Binance.US deal, a survey published in court documents found that 97% of surveyed Voyager customers favored the restructuring plan.
On March 7, bankruptcy judge Michael Wiles approved the deal because he said the case could not be “frozen indefinitely” while regulators nibble on the issues. However, the next day, the ping-pong game continued as the U.S. Department of Justice filed an appeal against the approval.
Alameda returns to the stage
Meanwhile, on January 30, Alameda Research launched a $446 million lawsuit against Voyager Digital, alleging that Voyager “knowingly or recklessly” diverted customer funds to Alameda.
Following the initiation of this lawsuit on Feb. 6, Voyager’s lawyers filed a subpoena with the SBF along with Alameda CEO Caroline Ellison, FTX co-founder Gary Wang, and Ramnic Arora, head of product at FTX.
Then, on February 19, Voyager’s creditors served the SBF with a summons to appear in court for “deposition at a distance”.
On March 8, court documents revealed that Delaware bankruptcy judge John Dorsey approved Voyager Digital to set aside $445 million in light of Alameda’s lawsuit. The next day, Alameda revealed that it planned to sell its remaining shares in Sequoia Capital to an Abu Dhabi-based fund for $45 million.
The situation between these three entities in relation to US legislators and regulators is ongoing.