Voyager Allegedly Selling Unregistered Securities
Voyager Digital has come under the regulatory scrutiny of U.S. state securities divisions in New Jersey, Oklahoma, Kentucky, Washington, Texas, Alabama, Vermont, and Indiana for operating interest-bearing crypto accounts.
According to state regulators, Voyager’s activities were in contravention of securities laws.
New Jersey’s cease and desist order noted that there are 1.53 million Voyager Earn Program accounts in the United States, of which 52,800 were from the state. The company also holds total assets of about $5 billion, with $197 million in assets coming from New Jersey.
A press release by Matthew Platkin, New Jersey’s Acting Attorney General, stated that Voyager’s Earn Program accounts were not registered with the state’s Bureau of Securities. The statement added that unregistered securities are risky for investors, as issuers do not make robust disclosures.
According to Platkin:
“Today’s action says loud and clear that the cryptocurrency securities market is not the Wild West, and investor-protection laws absolutely apply. Through efforts like this one, we continue to hold accountable all those who threaten the integrity of our financial industry and place investors at risk.”
Alabama, on the other hand, issued a show-cause order, giving Voyager the chance to defend itself if the company wants to continue operations.
U.S. Regulators Shine a Light on Crypto Lenders
This development comes as cryptocurrency lenders face increasing scrutiny by U.S. federal and state regulators. The New Jersey Bureau of Securities earlier issued a cease and desist order against Celsius for the same reason as Voyager.
In November 2021, BlockFi came under investigation by the U.S. Securities and Exchange Commission (SEC) over its crypto lending products, which offer annual yields up to 9.5%, a significantly higher percentage compared to traditional financial institutions.
Later in February 2022, BlockFi agreed to pay the SEC $50 million and another $50 million to 32 state regulatory bodies. Furthermore, the company will also stop onboarding new users for its high-yield lending products, which the SEC classifies as unregistered securities.
Back in September 2021, crypto exchange giant Coinbase halted plans to launch its crypto lending product to U.S. customers after the SEC threatened to sue the exchange.
Voyager in Talks With State Regulators to Clear Inaccuracies
Meanwhile, Voyager responded to several legal actions in a separate press release. The platform said it was aware of the various cease and desist orders from state securities divisions in Kentucky, Oklahoma, New Jersey, and Indiana, as well as the show-cause orders from state securities divisions in Texas, Washington, Alabama, and Vermont.
The company also revealed it was communicating with the aforementioned regulators to better understand the terms used in their various orders, and also “to clarify certain statements in the orders that Voyager believes are inaccurate.”
The statement further said:
“Voyager is firmly convinced that its Earn Program and the Voyager Earn Accounts are not securities and intends to demonstrate its position and defend it as necessary and appropriate.”
Will Voyager manage to evade further restrictions and fines? Or will these legal actions cost them more than they’re willing to pay? Time will tell.
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