Binance-Voyager Acquisition Under Scrutiny by CFIUS for National Security Risks

Binance’s recently announced acquisition of Voyager Digital Holdings, Inc., Voyager Digital Ltd., and Voyager Digital, LLC (collectively known as Voyager) is under review by the Committee on Foreign Investment in the United States (CFIUS) due to potential national security concerns.

In a statement submitted to the United States Bankruptcy Court for the Southern District of New York, the United States government stated that the Debtors’ transactions may be subject to review under the Defense Production Act of 1950, which allows the President to review covered transactions that could result in foreign control of a US business or involve the purchase or lease of certain real estate in the US by a foreign person.

CFIUS is an interagency committee that reviews certain transactions involving foreign investment in the United States in order to determine the effect on national security and mitigate any potential risks. In conducting its national security risk analysis, CFIUS considers issues including the potential effects on domestic industries and technological leadership, potential impacts on critical infrastructure and technologies, and any potential national security-related effects on the transaction.

The United States government’s statement also noted that CFIUS reviews necessarily involve the review of “commercially sensitive” information provided by the parties to the transaction, including non-public information about pending transactions and personal identifier information for board members, shareholders, and senior officers.

To protect the integrity of the CFIUS process and national security, the Defense Production Act requires that all information submitted to CFIUS be kept confidential, with limited exceptions. CFIUS is prohibited from disclosing any information concerning a particular transaction or any information disclosed in writing or orally in connection with a CFIUS review or investigation, unless necessary for administrative or judicial proceedings.

The confidentiality provisions of the Defense Production Act also include provisions prohibiting the unauthorized disclosure of CFIUS information and imposing civil and criminal penalties for such disclosures.

It is currently unclear how long the CFIUS review process will take or whether it will have any impact on the timing or terms of the Binance-Voyager deal. However, the United States government’s statement underscores the importance of CFIUS review in transactions involving foreign investment, particularly in cases where national security concerns may be present.