(Bloomberg) -- US officials are trying to block key parts of the sale of bankrupt Voyager Digital Ltd. to Binance.US, the American arm of the world’s biggest crypto exchange, while the government appeals a judge’s approval of the deal.

The government opposes any limits on its ability to punish anyone involved in the proposal and a related bankruptcy-exit plan that US Bankruptcy Judge Michael E. Wiles approved last week, a Justice Department lawyer said in court Tuesday.

Other aspects of the deal could go forward, but not the legal protections included as part of Voyager’s Chapter 11 plan, Assistant US Attorney Larry Fogleman told Wiles. Wiles agreed to hold a hearing Wednesday to decide whether to block the plan’s exculpation provisions. The provisions, which are routine in corporate bankruptcy cases, protect people from being held personally liable for implementing a court-approved plan.

Under its bankruptcy plan, Voyager has the option of selling itself to Binance.US or liquidating its assets and distributing the money to creditors. Wiles gave the company permission to do either after four days of contentious bankruptcy hearings.

But lawyers for the US Securities and Exchange Commission claim that parts of the deal and the plan violate federal law. The SEC and other federal lawyers also argued that the bankruptcy plan could undermine future efforts to police cryptocurrency markets. The US has appealed Wiles’ approval of the plan. 

The dispute reflects a growing conflict between efforts to rehabilitate troubled crypto companies and an increased regulatory push by the SEC.

In January, Voyager estimated in a court filing that customers may get back around half of what they are owed under the plan. By the start of last week’s court fight, Voyager attorney Christine A. Okike told Wiles the recovery estimate had climbed to about 73% based on recent prices of cryptocoins.

The bankruptcy is Voyager Digital Holdings Inc., 22-10943, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).

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