Voyager Digital and Celsius, two cryptocurrency law firms, are reportedly facing litigation in Texas and Alabama. The bankruptcy of both firms is being looked into by the regulators in these areas.
Bloomberg reported that the regulators are investigating whether the cryptocurrency lending companies hid information about their loans. The authorities are also evaluating the techniques they employed to determine the reliability of users.
Joe Rotunda, the enforcement director for the Texas Securities Board, offered his thoughts on the most recent inquiry. He claimed that the businesses might not have disclosed the risks associated with their lending strategies. As stated by Rotunda:
“The majority of cryptocurrency lending businesses may not have properly disclosed the specifics of their operations. This includes the activities they were engaging in behind the backs of investors. Additionally, they might have hid the dangers associated with their lending practices or the other kinds of transactions they engage in. What we are currently seeing is this.
Judge Receives Crypto Advice
Judge Michael Wiles is in charge of the bankruptcy case involving Voyager. It is important to note that this is the first bankruptcy hearing for a company dealing in digital assets.
Judge was therefore unfamiliar with digital assets. Wiles consequently received a thorough introduction to digital assets.
From lawyers for Voyager, he learned about crypto concepts like stablecoins, lending, and staking. Christopher Marcus, Christine Okike, and Josh Sussberg of Kirkland & Ellis were the legal counsel for Voyager.
There are numerous unresolved issues with the case, as both the attorneys and Judge Wiles acknowledged. As the first bankruptcy involving digital assets, this also includes taking care of the bankruptcy issue.
Judge Mentions Legal Concerns Issue
Additionally, Voyager’s lawyer acknowledged that there might be a few legal issues. This is due to the fact that many of them were ignorant of digital assets.
The Judge did ask about Voyager’s interaction with account holders, though. This includes whether they act as a custodian for their clients’ funds or whether they treat them like bank depositors.
The $350 million in client funds that the Metropolitan Commercial Bank is holding is the subject of his inquiry. Sussberg informed the judge that the consumers still own the money.
Therefore, the business will make every effort to see that they are paid. He added that this would only be done after the company had stopped fraud.
Attorneys for Voyager claim that the company is ready to sell if a buyer can be found. Finally, the company is in danger from both customers and governmental organizations, according to Voyagers’ lawyers. The majority of these organizations blame them for the bankruptcy problem.