Developed markets lagging behind in digital payments: BlackRock CEO

March 16, 2023 Coin Telegraph

Africa

In a letter to investors, BlackRock CEO Larry Fink highlighted the benefits of digital assets and said developing nations like the U.S. are lagging behind in innovation.

The CEO of American investment company BlackRock, Larry Fink, highlighted the potential of digital assets and tokenization for the asset management industry in his annual chairman’s letter to the company.

The letter was published on March 15 and addressed various topics of interest to the firm over the last year, including digital assets. Fink highlighted the rising and sustained interest in these types of assets despite the FTX catastrophe.

He said beyond the hype, “interesting developments” are happening in the space. He especially noted the “dramatic advances” in the digital payment solutions that help forward financial inclusion in many emerging markets like India, Brazil and Africa.

However, according to Fink, developing markets are not at the same pace innovation-wise:

“By contrast, many developed markets, including the U.S., are lagging behind in innovation, leaving the cost of payments much higher.”

BlackRock currently manages around $8 trillion in assets and is one of the largest asset managers in the world. Fink said the asset management industry could have some “exciting applications” of the technology underlying these digital asset innovations.

Specifically, he praised the tokenization of asset classes with their potential in “driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”

His statement ended not leaving out the risks and need for regulation of the crypto space but still pointing out that the company will be further exploring digital assets going forward.

This is not the first time Fink has made commentary on decentralized finance. After the fall of FTX, he commented that the FTX Token (FTT) caused the exchange’s downfall because it goes against “the whole foundation of what crypto is.

However, in the same conversation, he openly called the underlying technology of crypto and the blockchain revolutionary.

Back in September 2022, BlackRock released a new exchange-traded fund that invests in 35 blockchain-related companies.

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Binance US, Alameda, Voyager Digital and SEC — the ongoing court saga

March 13, 2023 Coin Telegraph

Bankruptcy

Court cases involving the U.S. SEC and some major crypto industry enterprises - Voyager Digital, Alameda Research and Biance - have continued to progress throughout 2023.

Over the last year, a series of court cases have struck the crypto industry. Bankruptcy, liquidity issues and fraud have caused the industry to fall under the microscope of regulators around the world.

The former cryptocurrency brokerage company Voyager Digital, Alameda Research - the investment arm of FTX- and cryptocurrency exchange Binance have been among some of the major entities dealing with the United States Securities and Exchange Commission in the battle over assets and owed funds.

As the new year has continued on, so have many of these 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 way before the FTX liquidity crisis came to light. On July 5, 2022, the company filed for bankruptcy in its initial attempt to “return value” to more than 100,000 customers who lost millions in funds at the hands of the crypto broker.

Nearly a month after its bankruptcy filing, it became known that Voyager had “deep ties” to Alameda Research. Alamada was also the largest stakeholder in Voyager, with an initial 11.56% stake in the company after two investments that totaled $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.

Ultimately the auction was won by FTX through 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 via the FTX deal - similar to what is currently being said by some involved with the Voyager-Binance.US bid.

However, in late October, prosecutors in Texas objected to the Voyager auction and began an investigation on FTX for potential securities violations.

The 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 all announced filing for Chapter 11 bankruptcy in the U.S., along with the resignation of former CEO and co-founder Sam Bankman Fried on Nov. 11.

This incident changed the trajectory of the entire industry with a domino of companies affected by their proximity to the fallen exchange.

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

It was after this ecosystem collapse that the SEC began to question its oversight strategies for the crypto industry. Now, FTX’s bid for Voyager was off the table and FTX itself was also put 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-reserve concept post-FTX. The exchange even toyed with acquiring FTX, though ultimately did not go through with the deal.

Nonetheless, around Dec. 19, it was revealed that Binance.US would be set to acquire Voyager Digital assets for around $1 billion.

Shortly after, on Jan. 5, 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 the state of 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 granted the deal approval, as he 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, back 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 SBF, along with Alameda CEO Caroline Ellison, FTX co-founder Gary Wang and Ramnic Arora, head of product at FTX.

Then on Feb.19, Voyager creditors served SBF 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.

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US Trustee appeals NY Judge’s approval of Voyager deal with Binance.US

March 10, 2023 Coin Telegraph

Bankruptcy

The United States Department of Justice filed an appeal against an approval made by N.Y. just days before to allow a billion-dollar sale of assets from Voyager Digital to Binance.US.

The United States Department of Justice (DOJ) has filed an appeal against the latest decision in the case for the selling of assets between Voyager Digital and Binance.US.

On March 8, the U.S. Trustee for Region 2 made the appeal to the U.S. District Court for the Southern District of New York against the approval of Voyager Digital’s Chapter 11 bankruptcy plan.

The chapter 11 plan was confirmed only a day prior, on March 7, by U.S. bankruptcy judge Michael Wiles. This plan would have allowed the former crypto brokerage company to go forward with selling billions of dollars in assets to Binance.US in an effort to regain liquidity to pay back customers.

After Wiles told Bloomberg that he cannot put the case into an “indeterminate deep freeze while regulators figure out whether they believe there are problems with the transaction and plan."

He also reportedly said that through the current plan,“Voyager’s customers would see an estimated 73% recovery.” Moreover, a poll that was released in a court filing on Feb. 28, revealed that 97% of Voyager customers themselves are in favor of the Binance.US deal.

Nonetheless, the U.S. Securities and Exchange Commission (SEC) has been outspokenly against this deal. The financial regulator has said this asset restructuring plan and Binance.US’ acquisition could be in breach of securities law.

In a court filing from Feb. 24, the Texas State Securities Board and the Department of Banking also objected to the deal with Binance.US.

In the case that U.S. regulators successfully block this deal from going through, Voyager has the option to liquidate. The initial bankruptcy was filed on July 5, 2022, as the broker’s attempt to restructure and “return value” to more than 100,000 customers.

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SEC files objection to Binance US bid for Voyager assets

February 23, 2023 Coin Telegraph

Binance

The SEC has moved to bar final approval of Binance.US’ $1 billion bid for assets belonging to bankrupt crypto lending firm Voyager Digital.

The United States Securities and Exchange Commission (SEC) has objected to Binance.US’ move to acquire over $1 billion of assets belonging to the defunct cryptocurrency lending firm Voyager Digital.

According to a Feb. 22 filing submitted to the U.S. Bankruptcy Court in the Southern District of New York, the SEC believes that certain elements of the asset restructuring plan of Binance.US’ acquisition could breach Securities Laws.

The SEC is formally investigating whether Binance.US and related debtors violated anti-fraud, registration and other provisions of the federal securities laws. The SEC noted particular concern around the security of assets through the planned acquisition.

The SEC argues information provided in the planned purchase of Voyager assets fails to adequately outline whether Binance.US or affiliated third parties will have access to customer wallet keys or control over anyone with access to such wallets.

Furthermore, the filing notes insufficient provision of safeguards to ensure that customer assets are not transferred off the Binance.US platform. The SEC also argues that Binance.US has not declared internal controls and practices ensuring the safety of customer assets.

The SEC is calling for Binance.US to address these issues by providing information regarding who has access to customer assets and the necessary controls after the deal is finalized.

The SEC is particularly focused on part of Binance.US’ initial plan and disclosure statement for its Voyager bid. The company will retain the right to sell cryptocurrencies belonging to Voyager to distribute to account holders, which is the main point of concern for the US regulator.

“However, the Debtors (Binance.US) have yet to demonstrate that they would be able to conduct such sales in compliance with the federal securities laws.”

According to the filing, various cryptocurrency transactions will need to take place to rebalance funds for redistribution to account holders, which the SEC believes may violate sections of its Securities Act.

The regulator argues that the disclosure statement provided by Binance.US and other debtors does not address the possibility of these transactions being unlawful. It’s believed that this possibility could impact the estimated 51% recovery of funds that will be paid out to account holders and claimants of Voyager.

A footnote of the filing highlights the potential of Voyager buying and selling certain digital assets to rebalance asset holdings. The SEC flags the potential sale of VGX tokens that are issued by Voyager, which ‘may constitute the unregistered offer or sale of securities under federal law’.

The SEC also notes that Binance.US could be acting as an exchange under existing Exchange Act laws, which it is prohibited to do without the necessary registration as a national securities exchange or exemption from doing so.

The filing highlights concerns over the lawfulness and overall ability to carry-out planned asset restructuring through the acquisition and questions whether Voyager debtors will be able to recoup some of their assets following the bankruptcy of the firm:

“Creditors and stakeholders are entitled to know whether this transaction provides them a meaningful economic benefit, or whether this is just a $20 million sale of Voyager’s customer list to Binance.US.”

As Cointelegraph previously reported, Binance is looking to remedy previous regulatory and law-enforcement investigations in the U.S. The firm is facing the possibility of fines relating to previous compliance issues.

Binance is also dealing with regulatory action towards Paxos, which is responsible for issuing Binance’s US Dollar backed BUSD stablecoin. The New York Department of Financial Services (NYDFS) ordered the firm to stop minting BUSD tokens from Feb. 21. Paxos has countered claims from the SEC that BUSD is a security, after receiving a Wells notice from the regulator for failing to register the token as a security in the U.S.

U.S.