The appeal comes just one day after Judge Michael Wiles gave Voyager Digital the go-ahead to sell its assets to Binance.US.

The U.S. Department of Justice (DOJ) filed an appeal late Thursday evening challenging a New York bankruptcy judge’s decision to allow Binance.US’s billion-dollar plan to acquire the assets of bankrupt crypto lender Voyager Digital.

The appeal, which was filed by the U.S. Trustee’s Office – an arm of the DOJ responsible for overseeing bankruptcies – comes just one day after Judge Michael Wiles approved the deal after a contentious, four-day-long marathon hearing.

Regulators, including the U.S. Securities and Exchange Commission (SEC) and various state regulators have been staunchly opposed to the proposed deal. Last month, the SEC filed an objection to the purchase of Voyager, arguing that Binance.US may be violating federal securities laws by operating an unregistered securities exchange in the U.S.

However, Judge Wiles appeared to be unmoved by the SEC’s concerns, telling the lawyers present at the hearing that the Bankruptcy Code “doesn’t contemplate an endless period of time.”

“Things have to be done. We have creditors who are waiting and who in the midst of all of this uncertainty have no access to property in which they’ve invested, in some cases, their life savings, so we have to take some kind of action,” Wiles said. “We have to do something.”

Under the proposed sale to Binance.US, Voyager’s customers would see an estimated 73% recovery. The plan, which was assembled after FTX – Voyager’s previous top bidder – filed for its own bankruptcy in November, was supported by 97% of Voyager’s creditors.

If Voyager decides not to go through with the current plan to sell itself to Binance.US – or if regulators are successful in blocking the sale – another option is for the bankrupt lender to liquidate itself, which would likely result in much smaller returns for creditors.

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FTX US’s bid is valued at approximately $1.4 billion, according to a Voyager press release late Monday Eastern time.

Exchange giant FTX won the bidding war to buy the assets of bankrupt Voyager Digital, Voyager said in a press release late Monday Eastern time. FTX was bidding against Wave Financial, a digital-asset investment firm.

Voyager Token (VGX) rose after the announcement, gaining 3.76% as of 04:17 UTC, trading around 76 U.S. cents.

Crypto lender Voyager Digital filed for bankruptcy in July. Industry observers had been increasing their scrutiny of Voyager’s business practices, particularly how the Canadian-listed firm said in marketing materials that investors’ deposits were protected by Federal Deposit Insurance Corporation (FDIC) insurance.

While FDIC insurance would indeed protect bank-held cash deposits up to $250,000, it would not cover cash converted to stablecoins. According to writer Frances Coppola, Voyager’s loan book accounted for nearly half of its total assets, and nearly 60% of that loan book was composed of loans to Three Arrows, which filed for Chapter 15 bankruptcy, also in July.

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The Toronto-based lender filed for Chapter 11 bankruptcy in New York late Tuesday.

Crypto lender Voyager Digital filed for bankruptcy late Tuesday, becoming the second high-profile crypto firm to do so in recent days.

The Toronto-based Voyager filed for Chapter 11 bankruptcy protections Tuesday in the Southern District of New York, estimating that it had more than 100,000 creditors and somewhere between $1 and $10 billion in assets. It also recorded the same range for its liabilities.

The company believes that “funds will be available for distribution to unsecured creditors,” according to the filing.

Voyager Digital Holdings, Inc., Voyager Digital, LLC and Voyager Digital Ltd. all filed for bankruptcy.

Crypto companies – and lenders in particular – have faced solvency issues in recent weeks, with several stopping customers from withdrawing their funds. Celsius kicked off this trend last month, announcing in mid-June that it would suspend withdrawals. CoinLoan, CoinFLEX and Voyager itself all announced restrictions or outright halts on withdrawals in recent days.

Voyager joins Three Arrows Capital in filing for bankruptcy. Three Arrows, however, filed a Chapter 15 petition tied to an ongoing liquidation effort ordered by a court in the British Virgin Islands.

According to writer Frances Coppola, Voyager’s loan book accounted for nearly half of its total assets, and nearly 60% of that loan book was composed of loans to Three Arrows.

In a statement posted online after this article was published, Voyager CEO Steven Ehrlich said reorganizing the company “is the best way to protect” the company’s assets, and pointed the finger at Three Arrows for some of its woes.

Following that statement, Ehrlich posted on Twitter that “Customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens.”

‘FDIC’ protections?
The filing comes as industry observers increase their scrutiny of Voyager’s business practices, particularly how the Canadian-listed firm said in marketing materials that investors’ deposits were protected by Federal Deposit Insurance Corporation (FDIC) insurance.

While FDIC insurance would indeed protect bank-held cash deposits up to $250,000, it would not cover cash converted to stablecoins. Commentators including Coppola have called Voyager’s marketing around its handling of deposits misleading.

Moreover, the FDIC insurance kicks in in the event of a bank failure – in this case, Voyager was banked by Metropolitan Commercial Bank. There is no protection in the event of a Voyager failure.

Creditors
According to the filing, Voyager Digital, Ltd.’s equity holders include Alameda Research Ventures LLC and Alameda Ventures Ltd., two companies associated with Sam Bankman-Fried, the founder of crypto exchange FTX who has extended credit lines or otherwise bailed out other crypto companies.

Voyager also owes Google nearly $1 million, according to the filing.
Voyager’s stock, already battered by the crypto market selloff, was trading at 27 cents at market close Tuesday, giving the company a market cap of $65 million Canadian dollars (around $50 million USD). That’s smaller than the $75 million unsecured loan issued by Alameda Research, according to the bankruptcy filings.

The stock traded above $20 last November, but fell below a dollar last month.

Voyager also claimed in its blog post that it had $110 million in cash, $350 million in cash at Metropolitan, $1.3 billion in crypto and was owed $650 million from Three Arrows. It did not say what specifically the liabilities are.

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