District Court Vacates Voyager Plan Exculpations For Lack Of Bankruptcy Code Authority

On August 4, 2026, Chief Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York issued an opinion vacating the confirmation order in Voyager Digital Holdings’ (Voyager or the Debtors) Chapter 11 cases to the extent that the confirmation order approved certain exculpation provisions in Voyager’s Chapter 11 plan. In re Voyager Digital Holdings, Inc., No. 23-CV-2171 (LTS), slip op. at 39 (S.D.N.Y. Aug. 6, 2026). The opinion was amended on August 6, 2026, to correct a scrivener’s error. Id. at 3 n.*. In the ruling, the Court held that the Bankruptcy Court lacked authority to grant the exculpated parties prospective protection against liability and criminal responsibility and to constrain future exercises of governmental prosecutorial or regulatory power in connection with implementation of Voyager’s confirmed Chapter 11 plan. Id. at 39. The decision adds to a growing body of case law limiting the scope of exculpations available under Chapter 11 plans as courts grapple with the scope of the Supreme Court’s Purdue decision.

Background 

Voyager, a cryptocurrency firm, sought Chapter 11 protection in July 2022. Id. at 5. On March 8, 2023, the Bankruptcy Court confirmed Voyager’s Chapter 11 plan (the Plan), which contemplated either a sale of Voyager’s assets to Binance or, if the sale could not be completed, a liquidation and direct distribution of cryptocurrency to Voyager’s customers. Id. at 5. Under either scenario, the Plan required “rebalancing” transactions before distributions could be made. Id. Those transactions involved buying and selling cryptocurrency to account for coin deficiencies and post-petition price fluctuations so that Voyager’s remaining crypto portfolio could support pro rata in-kind distributions to customers. Id. at 5-6. To protect the parties responsible for carrying out the rebalancing transactions, the Plan included an exculpation provision shielding covered parties from liability for carrying out the court-approved rebalancing transactions and cryptocurrency distributions, with a carve-out for instances of actual fraud, willful misconduct or gross negligence. Id. at 6-7. The exculpation provision also did not prevent governmental entities from seeking to enjoin any of the rebalancing transactions. The Bankruptcy Court justified the exculpation provision as protecting parties from later allegations that the Plan’s required transactions violated nonbankruptcy law, while preserving governmental units’ ability to challenge or enjoin future transactions or enforce future regulatory or court orders. Id. at 7-10.

The District Court’s review of the exculpation provision

On March 14, 2023, the United States and the United States Trustee appealed the confirmation order, challenging the Bankruptcy Court’s authority to approve the exculpation provision. Id. at 10. The United States also moved to stay the effective date of the Plan pending resolution of the appeal, and the parties ultimately agreed to a stay of only the exculpation provision of the Plan in April 2023. Id. Judge Swain ultimately ruled on the merits of the appeal after hearing oral argument on June 23, 2026, and after walking through each of the potential bases supporting the exculpation, ruled that the exculpation provision was not supported by the Bankruptcy Code. Id. at 10-12, 17-32.

A. Purdue did not control the outcome

Judge Swain first considered whether the Supreme Court’s decision in Harrington v. Purdue Pharma LP, 603 U.S. 204 (2024), which held that nonconsensual third-party releases are generally not authorized by the Bankruptcy Code, precluded approval of the exculpation provision as impermissible third-party releases. 

In concluding that Purdue did not control, Judge Swain explained that exculpations are materially different from the nonconsensual third-party releases invalidated in Purdue because Voyager’s exculpation provision did not wholesale discharge all claims against a nondebtor. Id. at 14-15. Rather, the exculpation provision purported to relieve individuals implementing the Plan from liability for specific actions taken at the direction of the Bankruptcy Court, as long as those actions did not constitute actual fraud, willful misconduct or gross negligence. Id. at 15. Furthermore, unlike the releases in Purdue, the exculpation provision did not protect third parties from liability for prior conduct unrelated to implementation of the plan. Id. at 15-16. Accordingly, Purdue did not compel rejection of the exculpation provision, but its analysis of Sections 105(a) and 1123(b)(6) would be relevant to whether the Bankruptcy Code affirmatively authorized the exculpations.

B. The Bankruptcy Code did not authorize the exculpation provision

Judge Swain next considered whether the exculpation provision was permitted under the Bankruptcy Code, emphasizing that a bankruptcy court’s equitable powers require explicit statutory authorization. Id. at 17-18. The Plan proponents argued that the exculpation provision was authorized by Sections 105(a), 1123(b)(6), 1129(a)(3), 1142(a) and 1142(b). Id. at 17-18. The Court methodically rejected each asserted statutory basis. Id. at 18-32.

First, applying Purdue, the Court held that Section 105(a) does not independently authorize exculpations, because it permits bankruptcy courts to issue only those orders necessary or appropriate to carry out other Bankruptcy Code provisions. Id. at 18. Accordingly, as Section 105 cannot be used in isolation, any exculpation provision must be tied to a separate statutory basis.

Judge Swain next rejected the Plan proponents’ reliance on Section 1123(b)(6) as the Plan “catchall” provision. Applying Purdue, the Court explained that Section 1123(b)(6) authorizes only the inclusion of provisions that “concern the debtor—its rights and responsibilities, and its relationship with creditors.” Id. at 19. The Court rejected the argument that the exculpation provision satisfied that standard simply because the provision helped the Debtors implement the Plan or obtain bankruptcy relief. Id. Accordingly, the exculpation provision could not be justified merely because it facilitated Voyager’s ability to consummate its Plan and make distributions to creditors.

The Court similarly rejected Section 1129(a)(3), which requires that a plan be proposed in good faith and not by any means forbidden by law, as a basis for the exculpation provision. Id. at 20. Judge Swain explained that Section 1129(a)(3) operates as a constraint on confirmation (i.e., a basis to confirm a plan), not as an affirmative grant of power to include specific provisions in a plan. Id. The Court also noted that confirmation of a plan would not insulate debtors from prosecution for criminal activity, even if the activity is contemplated by the plan. Id.

Next, the Court dismissed the Plan Proponents’ reliance on Section 1142. Section 1142(a) requires a debtor and certain entities responsible for implementing a plan to carry out the plan notwithstanding otherwise applicable nonbankruptcy laws, rules or regulations “relating to financial condition.” Judge Swain held that this limiting phrase narrowed the statute’s preemptive effect only to nonbankruptcy laws relating to financial condition. Id. at 21-23. Because the exculpation provision sought broader protection from liability under nonbankruptcy law and did not specifically relate to the Debtors’ financial condition, the Court held that the provision was not permitted by Section 1142(a). Id. at 21-23.

Finally, Judge Swain considered Section 1142(b), which permits a bankruptcy court to direct parties to take acts necessary to consummate a confirmed plan. The Court held that authority to direct plan implementation does not equate to authority to prospectively shield parties from liability for carrying out a plan. Because Section 1142(b) did not authorize advance protections from nonbankruptcy liability or criminal responsibility, it could not support the exculpation provision. Id. at 23-32.

C. Quasi-judicial immunity did not save the exculpation provision

The Plan proponents alternatively argued that the exculpation provision was a permissible application of quasi-judicial immunity. Judge Swain rejected this argument as well.

The Court explained that quasi-judicial immunity protects certain persons who perform functions closely associated with the judicial process, including those who enforce or execute court orders. Id. at 32-33. The doctrine exists because parties should not be forced to choose between disregarding a court order and risking contempt or complying with the order and risking liability. Id. at 33.

The Court recognized that quasi-judicial immunity is well-established in bankruptcy, including for trustees, certain court-appointed officers, and creditors’ committees acting within the scope of their authority. Id. at 35-37. But Judge Swain emphasized that the doctrine operates after the fact: If a party is sued for carrying out a court order, that party may raise quasi-judicial immunity as an affirmative defense. Id. at 37. Voyager’s exculpation provision went further because the Debtors sought to immunize future conduct in advance. Id. at 37-38. The Court therefore held that quasi-judicial immunity did not permit the Bankruptcy Court to predetermine liability for future transactions. Id. at 37-39.

The Court also held that quasi-judicial immunity did not extend to criminal responsibility. Judge Swain noted that the cited case law on this point was, at most, unsettled dicta. Id. at 38-39. Because Voyager’s provision sought ex ante immunity from criminal responsibility as opposed to ex post, it exceeded the recognized scope of quasi-judicial immunity.

Ultimately, Judge Swain vacated the confirmation order to the extent it approved the exculpation provision and remanded the matter for further proceedings. Id. at 39.

Why this case matters

Many courts have weighed in – often with conflicting positions, as Judge Swain notes – on the scope of plan exculpations, in terms of both what parties and what conduct can be exculpated. The recent Purdue ruling gives bankruptcy judges further support to limit exculpations that are not grounded in a clear statutory basis. While exculpations remain distinct from nonconsensual third-party releases, this decision underscores that exculpations must be carefully tailored. They are common elements of a plan and can be used to provide relief to estate professionals for historic conduct. From this view, the disputes that arise concern who else – other than the estate fiduciaries – can be covered. Voyager focuses on what may be covered, holding that exculpations cannot be used to provide prospective immunity for future conduct, limit governmental enforcement authority or protect against potential criminal responsibility absent explicit Bankruptcy Code authority to do so.