By Dietrich Knauth
(Reuters) - A U.S. bankruptcy judge declined to delay the $1.3 billion sale of crypto lender Voyager Digital to Binance.US, saying Voyager customers should not be forced to wait out a challenge by the Department of Justice that is unlikely to succeed.
Judge Michael Wiles in Manhattan ruled on Wednesday that the department had mischaracterized the scope of legal protections he had granted to Voyager employees for actions to carry out the sale and rebalance its crypto portfolio.
Wiles, who is overseeing Voyager's Chapter 11 process, approved its bankruptcy plan last week.
The government can "can step in at any time" if it believes illegal transactions are happening, but has not presented any evidence that Voyager's crypto transactions are illegal, Wiles said.
The U.S. Attorney's Office for the Southern District of New York and the Office of the U.S. Trustee, the Justice Department's bankruptcy watchdog, both filed appeals last week. They argued that the protections could rubber stamp crypto transactions that might be illegal under U.S. securities laws.
Voyager and the DOJ did not immediately respond to requests for comment. Voyager had previously said its customers should not be forced to "stand idly" during a lengthy appeal process.
Binance.US has agreed to pay $20 million in cash to Voyager, and take on crypto assets deposited by Voyager customers. Those assets, valued at $1.3 billion in February, account for the bulk of the deal's valuation, according to Voyager.
Voyager said earlier this month it could still pull out of the deal and make an effort to return customer funds without outside help.
Voyager filed for bankruptcy in July, months after the crash of major crypto tokens TerraUSD and Luna sent shockwaves across the digital asset industry.