Voyager Digital Files for Chapter 11 Bankruptcy

On Tuesday, July 5, the cryptocurrency broker Voyager Digital filed a petition for bankruptcy in a New York court.

The company’s estimated liabilities range from $1 billion to $10 billion, with around 100,000 customers.

A similar petition under Chapter 11 of the United States Bankruptcy Code was filed by subsidiaries Voyager Digital Holdings Inc and Voyager Digital LLC. The company expects that the restructuring process will “maximize value for all stakeholders.”

Voyager Company and Customer Update: https://t.co/1VLshQrJrr

— Voyager (@investvoyager) July 6, 2022

«The Voyager platform was built to empower investors […]. While I firmly believe in this future, the prolonged volatility and contagion in the crypto markets over the past few months, as well as the default by hedge fund Three Arrows Capital (3AC) on the loan provided to Voyager Digital LLC, require thoughtful and decisive action from us now», — said the broker’s chief Stephen Ehrlich.

According to the press release, Voyager has around $1.3 billion on the platform, more than $350 million in a Metropolitan Commercial Bank account, and claims against 3AC exceeding $650 million. In addition, the company has approximately $110 million in cash and proprietary cryptocurrency assets.

Ehrlich stressed that the broker will continue operating. He said the goal is for Voyager to emerge stronger from the restructuring.

Voyagers, today we began a voluntary financial restructuring process to protect assets on the platform, maximize value for all stakeholders, especially customers, and emerge as a stronger company. Voyager will continue operating throughout.https://t.co/TxlO4eua8E

— Stephen Ehrlich (@Ehrls15) July 6, 2022

«Clients with cryptocurrency in their account(s) will receive in exchange a combination of cryptocurrency in their account(s), the recovery proceeds from 3AC, ordinary shares in the newly reorganized company, and Voyager tokens,» Ehrlich wrote.

According to him, clients with USD deposits will gain access to funds after the verification process at Metropolitan Commercial Bank is completed. The executive added that the firm is actively using all available resources to reimburse losses from Three Arrows Capital.

It’s important to note that as part of this announcement we are confirming that customers with USD deposits in their account(s) will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.

— Stephen Ehrlich (@Ehrls15) July 6, 2022

On July 3, economist Frances Coppola drew attention to Voyager’s credit portfolio. According to her, it consists of 3AC loans comprising about 58%. After reviewing the financial statements, she concluded that the broker was in a very precarious position.

Earlier the company lent the hedge fund 15,250 BTC (about $304 million at the time of writing) and 350 million USDC. However, against the backdrop of the crash of the cryptocurrency market and the Terra crash, there was information about the insolvency of 3AC.

On June 23, Voyager reduced the daily withdrawal limit from $25,000 to $10,000 in light of 3AC’s troubles. To protect client assets, the company arranged with Alameda Research for a loan of 200 million USDC and the opening of a revolving line of credit for 15,000 BTC.

On June 24, Voyager Digital asked Three Arrows Capital to repay part of the debt of 25 million USDC, and then demanded the entire loan be repaid in BTC and stablecoins by June 27. Because this did not occur, the crypto broker sent 3AC a notice of default.

Three Arrows Capital filed for bankruptcy on July 2.

Prior to that, the British Virgin Islands court ordered the hedge fund liquidated, and Singapore’s financial regulator issued 3AC a reprimand for providing false information and exceeding the allowed assets under management threshold.

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