Is Voyager Appeal Doomed to Fail?

On Thursday, March 9, 2023, Judge Michael E. Wiles of the U.S. Bankruptcy Court for the Southern District of New York entered an order confirming the plan of reorganization proposed by cryptocurrency broker Voyager Digital Holdings, Inc., over the vehement objection of the federal government. The government took an appeal the very next day and, soon after, moved to stay the effectiveness of the plan pending appeal. On Thursday, March 16, 2023, Judge Wiles declined to stay the confirmation order. With mootness issues looming, is the appeal predestined to fail?


Although Voyager claimed to have 3.5 million customers and $5.9 billion in digital assets, it filed for protection under chapter 11 of the Bankruptcy Code in July 2022. This was due to a “run on the bank” plus inability to collect on a $650 million bad loan.

Plan of Reorganization

The ultimate goal of a chapter 11 bankruptcy case is to obtain court confirmation (approval) of a plan of reorganization, which sets new terms between the debtor and its creditors. In February, Judge Wiles considered whether to confirm Voyager’s proposed plan which, if confirmed, would result in a transfer of $1 billion in customer accounts to the U.S. arm of Binance, a cryptocurrency exchange, in return for $20 million.


The U.S. Trustee (a bankruptcy “watchdog” that is part of the Department of Justice) objected, contending that Voyager did not adequately explain the due diligence it conducted regarding Binance’s regulatory compliance and financial means, and that customer accounts may not be secure in Binance’s hands. The U.S. Trustee also argued that the plan would release too many people from potential liability related to the case—including all employees of Voyager, its affiliates, and their retained professionals—without providing a sufficient justification.

The U.S. Securities and Exchange Commission also objected to the plan. Among other things, the SEC is concerned that regulatory actions could make the plan impossible to execute. In fact, the SEC announced that the sale to Binance could be reviewed by the Committee on Foreign Investment in the United States.


Judge Wiles considered and dismissed the government’s concerns. At the hearing on plan confirmation, the judge commented that he had seen “zero, absolutely zero” admissible evidence of problems or misconduct on Binance’s part that would bar the transaction. The court also observed that the plan allows Voyager to enter into liquidation if Binance cannot fulfill its responsibilities. As for insider releases, Judge Wiles noted that such releases are commonplace in chapter 11 plans. Accordingly, Judge Wiles confirmed the plan.


The next day, the federal government took an appeal to the U.S. District Court for the Southern District of New York. Soon after, the government sought a stay pending appeal, which would prevent the plan from going into effect until the appeal is resolved.

On Wednesday, Judge Wiles declined to enter a stay pending appeal. In doing so, Judge Wiles commented that the government had exaggerated and mischaracterized his decision. He also criticized to government for not discussing authorities he relied on. In any event, the judge doubted that plan confirmation would stop regulators from scrutinizing the transaction in the ordinary course. “I have left open the right of the government to seek to stop the activities at any time….” “All I have done… is to confirm that, in the meantime, the people who are required to do things pursuant to my confirmation order will not be held liable for having done what I have required.”

Next Steps

But Judge Wiles did enter an order temporarily staying the plan for a short time to provide an opportunity to move for a stay pending appeal before the district court. The government so moved, and a hearing on its motion is set for Thursday, March 23, 2023.


Why is this important? One word: “mootness.” An appeal can be dismissed for equitable mootness if intervening events make it essentially impossible for the appellate court to grant relief (or “unscramble the egg”). In re Windstream Holdings, Inc., 838 F.App’x 634, 637 (2d Cir. 2021). Consummation of a chapter 11 plan and closing of a major transaction are classic grounds for equitable mootness. This is not conclusive—the doctrine of equitable mootness is fact-intensive—but it would seriously jeopardize the government’s chances of success on appeal.

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Hence, the question: is the government’s appeal predestined to fail? It depends on the outcome of Thursday’s hearing. If a stay pending appeal is denied, again, then the chances of success on appeal will plummet.

Book Recommendation

Today’s recommended reading is: Advanced Fraudulent Transfers, A Litigation Guide. Published by the American Bankruptcy Institute, this is a valuable resource for legal and financial professionals involved in leveraged deals and fallout. The book provides insight into intentional and constructive fraudulent transfers, their elements, and their defenses. The book dives into the details, including key opinions like Tribune, Lyondell, SemGroup, and Tronox.

View on Amazon

I personally recommend this book, and this is not sponsored. But I must disclose that this is an affiliate link. This means I earn a small commission if you use this link to buy the book. Thank you.

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