Federal Judge Blasts SEC for Poorly Argued Attempts To Claim Cryptocurrencies Must Be Regulated by Them
Many in the virtual currency industry have been confused and bedeviled by the Securities and Exchange Commission’s (SEC) gradual and ill-explained encroachment on their world, with frequent claims from SEC Chair Gary Gensler that most cryptocurrencies should be properly seen legally as “securities” that ought to be regulated by his agency. That would potentially make lots of legit businesses suddenly illegal dealers in “unregistered securities.”
In a decision last week in an ongoing bankruptcy case of Voyager Digital Holdings, U.S. bankruptcy Judge Michael E. Wiles in the U.S. Bankruptcy Court for the Southern District of New York laid into SEC agents for their perplexing and officious manner of trying to force through their attitudes about cryptocurrencies-as-securities.
Part of the proposed bankruptcy reorganization plan for Voyager Digital Holdings would involve shifting customer accounts over to cryptocurrency exchange Binance.
The SEC objected to this Binance solution, claiming “that in its view the Debtors had the burden to prove that the rebalancing of the Debtors’ cryptocurrency portfolios…would not involve illegal purchases and sales of securities.”
The SEC did this, as Judge Wiles complains, essentially through innuendo: “The objection did not take the position that any particular cryptocurrencies are securities, or otherwise explain how or why the Debtors’ rebalancing activities might be illegal, although it did contain a vague footnote suggesting that the VGX token was one as to which some unspecified issue might exist,” Judge Wiles wrote.
“The SEC also suggested that the Debtors should be required to prove that Binance.US is not operating as a securities broker without registering as such,” he continued. “Once again, the SEC did not actually take the position that Binance.US is operating as an unregistered and unlicensed securities broker. Instead, it just suggested that the Debtors had the burden to prove the negative, without offering any evidence or even any reason to think that Binance.US actually is doing anything for which it requires further SEC registrations.”
Judge Wiles finds this situation highly aggravating, noting that “Voyager oper
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