Binance.us, the supposedly independent American arm of the world’s biggest exchange by trading volume, has bought troubled crypto broker Voyager Digital’s assets for $1.022 billion, according to reports. Voyager filed for bankruptcy earlier this year. Binance’s purchase price is a slight decline from the $1.4 billion price that FTX was planning to pay for the assets, back in September.
What Is Binance.US Buying?
FTX had planned to pay $111 million for Voyager’s non-crypto assets. Out of that amount $51 million was in cash and set aside for tangible non-crypto assets, such as users and intellectual property. The remaining $60 million was structured as incentives for customers and employees to migrate to the FTX platform.
Presumably, the rest of FTX’s purchase price – amounting to $900 million – was for the more than 65 crypto assets supported by Voyager. That list included prominent coins like Bitcoin and Ethereum as well as a certain Serum token that constituted the second-highest token holding on FTX’s balance sheet.
In its statement announcing the acquisition, Binance.us stated that it was adding another $20 million of “incremental value” to the purchase price, meaning the price that the exchange will pay for Voyager’s assets remains essentially the same.
Valuing Voyager’s Assets
What is most surprising about the transaction is Voyager’s valuation. Voyager filed for bankruptcy more than five months ago. The value of its non-crypto assets – users, intellectual property, and other intangible assets – cannot have gone up. Meanwhile, crypto markets have been in a free fall since June as the crypto ecosystem is rocked by an unending stream of speculation and scandals.
Determining fair value for cryptocurrencies is hard enough. Assigning a roughly unchanged value in a time of crypto turmoil requires a feat of imagination and creativity, especially for tokens that are proven to be worthless and whose value has been marked down to zero.
Binance.US ‘s Operations
But that should not be a problem for Binance.US. According to a Reuters report earlier this year, the exchange is a “de facto subsidiary” of Binance’s unregulated international operations. It was created to divert the attention of regulators away from the parent’s sprawling operations, the article stated. Its former CEO disappeared mysteriously last year. Another one resigned after just three months on the job.
Like its parent, not much is known about Binance.US or its operations.
While Binance claims to have trading volumes that are greater than those of NYSE, LSE, and TSE combined, volumes at Binance.US are not known. The exchange supports nearly 150 tokens and calls itself the biggest staking platform in the US.
Perhaps the reason for the latter claim are its extraordinary staking interest rates. It offers 6% APY to stake ether – the world’s second most valuable cryptocurrency. Even better, staking the Cosmos blockchain’s ATOM token will get you 14% in a single year.
Side Swiping Economic and Crypto Fundamentals
It is offering these attractive rates during a time when some of the biggest liquidity providers in crypto are hurting or are considering filing for bankruptcy. It is also offering these rates during a time when economic fundamentals – read rapidly climbing interest rates – discourage investment in risky assets.
But foolish investors seem to be champing at the bit for a piece of crypto action.
Perhaps that is the reason why, after a $200 million raise this past April, it was valued at $4.5 billion in private markets, a figure much greater than that of its international counterpart – the one that is supposed to have fantastic trading volumes that surpass mainstream exchanges – which has a valuation of $23.53 million. For context, FTX was valued at $32 billion in private markets before its value came crashing down.
No prizes for guessing what might happen to Binance.US soon.