Voyager: Court shoots down government’s confirmation-stay request

By Sarah Lizee

Olympia, Wash., March 16 – The judge overseeing Voyager Digital Ltd.’s Chapter 11 bankruptcy case rejected the government’s motion to stay confirmation of the company’s plan pending an appeal, according to a decision and order filed Wednesday evening with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Voyager’s plan was confirmed on March 3, and Region 2 U.S. trustee William K. Harrington filed an appeal the following day.

Through the confirmation order, the court overruled an objection from the Securities and Exchange Commission, which stated some activities proposed in the plan may create unspecified securities law violations.

The United States and the U.S. trustee sought either a stay of the exculpation provision in the confirmation order and plan while the appeal is pending, or a stay of the confirmation order while the government seeks similar relief from the district court.

Judge Michael E. Wiles said that, while the relief requested by the government is denied, the parties did agree to push back the effective date of the plan to March 20 from March 15. Any further requests for stay will not be allowed.

Wiles said that the stay the government is seeking would extend long past the time when Voyager’s $1.3 billion sale and transfer deal with BAM Trading Services Inc. (Binance US) is set to close. The deal is what Voyager’s Chapter 11 plan is centered around.

“A stay could threaten the availability of that transaction, and the uncontroverted evidence before me at the confirmation hearing is that a loss of the Binance.US transaction would lead to a reduction of approximately $100 million in the assets available for distribution to creditors,” Wiles said in the decision.

He added that the stay would also postpone Voyager’s ability to implement the toggle feature under the plan and would further delay distributions.

“Every delay in these cases means that further administrative expenses will be incurred, which just further reduces creditor recoveries,” the judge said.

The automatic stay and other provisions of the bankruptcy code have had the effect of delaying customers’ access to their investments since July 2022. Many of those customers invested significant portions of life savings or retirement savings in cryptocurrencies held by the debtors, Wiles added.

“I am compelled to conclude that the harm that the debtors and their constituents would suffer if a stay were to be granted exceeds any harm that the government might incur due to the absence of a stay,” the judge said.

Voyager Digital is a cryptocurrency broker based in New York. The company filed bankruptcy on July 5, 2022 under Chapter 11 case number 22-10945.

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