Court cases have unavoidably followed a turbulent year in crypto. Due to bankruptcy, liquidity problems, and fraud, the industry is now being closely examined by regulators all over the world.
In disputes over assets and owing money, the US Securities and Exchange Commission (SEC) has targeted cryptocurrency exchange Binance, Alameda Research, the former cryptocurrency brokerage Voyager Digital, and FTX’s investment division Alameda Research.
Several cryptocurrency court proceedings have continued as 2023 has progressed. This is a quick summary of the most important legal disputes in the sector right now.
Voyager Digital’s predicament started before the FTX liquidity problem became public knowledge. The business filed for bankruptcy on July 5, 2022, initially aiming to “restore value.”
Voyager had “deep ties” to Alameda Research, it was discovered about a month after the company declared bankruptcy. With two investments totaling $110 million, Alamada was also the largest shareholder in Voyager, holding an 11.56% stake in the business.
On September 13, the assets of Voyager were put up for auction, and some of the top players in the sector competed for a piece of what was left of the company. These featured companies like FTX, CrossTower, and Binance.
After receiving a $1.4 billion bid for the company’s assets, FTX won the auction. When the FTX agreement was announced, it was claimed that Voyager users may recover 72% of their funds, which is comparable to current claims made by people involved with Binance.acquisition US’s offer for Voyager.
Prosecutors in Texas, however, objected to the Voyager auction and opened a probe into FTX for possible securities breaches in late October.
Before any agreements were concluded, one of the biggest surprises of the year for the cryptocurrency sector occurred when FTX, FTX US, and Alameda Research filed for Chapter 11 bankruptcy in the U.S. Sam Bankman-Fried, the co-founder and former CEO, resigned shortly after, on November 11.
An industry-wide domino effect resulted from this tragedy, with businesses impacted by their proximity to FTX.
Following this abrupt decline, the SEC started to reconsider how it oversees the cryptocurrency sector. Both FTX’s offer for Voyager and FTX itself were on the market.
Changpeng “CZ” Zhao, co-founder and CEO of Binance, was the first to propose a proof-of-reserves idea post-FTX at the start of the liquidity crisis. The exchange even considered acquiring FTX, but eventually decided against it.
On or around December 19, it was made public that Binance.US planned to buy the assets of Voyager Digital for about $1 billion.
Soon after, on Jan. 5, 2023, the SEC submitted an objection to the acquisition of Binance.US because it wanted to see more information included in the $1 billion agreement between the two companies.
Despite the fact that the SEC and Texas politicians both opposed the Binance.US transaction, a survey made public in court filings found that 97% of Voyager customers supported the restructuring strategy.
Michael Wiles, the bankruptcy judge, authorised the agreement on March 7 and ruled that the case couldn’t be placed in a “indefinite deep freeze” while authorities fixed minor issues. Nonetheless, the ping-pong match went on the following day despite the US Department of Justice filing an appeal against the decision.
In the meantime, Alameda Research filed a $446 million lawsuit on January 30 against Voyager Digital, alleging that Voyager “knowingly or negligently” transferred consumer assets to Alameda.
Once this case was filed, on February 6, Voyager’s attorneys placed a subpoena on Sam Bankman-Fried, former Alameda CEO Caroline Ellison, co-founder of FTX Gary Wang, and FTX head of product Ramnic Arora. A subpoena to appear in court for a “remote case” was delivered to Bankman-Fried by Voyager creditors on February 19.
According to court records, Delaware bankruptcy judge John Dorsey authorised Voyager Digital to set aside $445 million in response to Alameda’s claim on March 8. The following day, Alameda made public its intention to transfer its remaining stake in Sequoia Capital to an Abu Dhabi fund for $45 million.