According to reports, cryptocurrency law firms Voyager Digital and Celsius are under heat in Alabama and Texas. The regulators in these regions are investigating the bankruptcy of both firms.
As stated by Bloomberg, the regulators are looking into whether the crypto lending firms withheld information about their loans. Also, the authorities are assessing the methods they used to establish the trustworthiness of users.
The Texas Securities Board’s director of enforcement, Joe Rotunda, commented on the recent investigation. He said the firms may not have disclosed the dangers connected to their lending techniques. According to Rotunda:
“Most crypto-lending companies may not have properly revealed the details of their activities. This includes what they were doing with investors’ money behind their backs. Also, might have concealed the risks involved with their lending practices, or the other sorts of transactions they are involved in. This is what we are witnessing right now.”
Judge Gets Lectured About Crypto
Michael Wiles is the presiding JudgeJudge over Voyager’s bankruptcy proceeding. It is worthy to say this is the first-ever bankruptcy hearing for a digital asset firm.
As a result, Judge had little knowledge about digital assets. Hence, Wiles received a sharp course on what digital assets are.
He learned about crypto ideas like stablecoins, lending, and staking from attorneys for Voyager. The lawyers representing Voyager were Christopher Marcus, Christine Okike, and Josh Sussberg of Kirkland & Ellis.
The attorneys and Judge Wiles acknowledged that there are many unanswered concerns about the case. This includes handling the bankruptcy issue because it is the first involving digital assets.
Judge Cites Issue Of Legal Concerns
Furthermore, Voyager’s attorney also acknowledged that there might be some legal concerns. This is because many of them were unfamiliar with digital assets.
However, the Judge inquired about Voyager’s relationship with account holders. This includes if it is a custodian for clients’ money or whether they are treated similarly to bank depositors.
His inquiry concerns the $350 million in client funds held by the Metropolitan Commercial Bank. Sussberg told the Judge that the money still belongs to the consumers.
As a result, the company will do everything to ensure they are paid. Also, he said this would only be carried out when the business had prevented fraud.
According to Voyager’s attorneys, the firm is willing to sell if it can get a buyer. Finally, Voyagers lawyers said the company is in danger from customers and governmental agencies. Most of these entities are holding them responsible for the bankruptcy issue.
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