Crypto firm Voyager Digital files for Chapter 11 bankruptcy protection

Voyager said it has around $1.3 billion in crypto on its platform and holds more than $350 million in cash on behalf of clients at Metropolitan Commercial Bank of New York.

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Embattled crypto brokerage Voyager Digital has filed for Chapter 11 bankruptcy, becoming the latest victim of chaos in digital asset markets.

Voyager filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York on Tuesday, according to a company filing. The filing lists assets between $1 billion and $10 billion and liabilities in the same range.

In a statementthe company said it has around $1.3 billion worth of crypto on its platform and holds more than $350 million in cash on behalf of customers at New York’s Metropolitan Commercial Bank.

Voyager suffered huge losses due to its exposure to crypto hedge fund Three Arrows Capital, which went bankrupt last week after defaulting on loans from a number of companies in the sector, including $650 million. travel.

“We strongly believe in the future of the industry, but the prolonged volatility in the crypto markets and the default of Three Arrows Capital forces us to take this decisive step,” Voyager CEO Stephen Ehrlich said in a statement on Wednesday. a tweet.

Shares of the Toronto-listed company have lost nearly 98% of their value since the start of 2022.

Voyager says it is still pursuing the recovery of funds from Three Arrows Capital, or 3AC as it is otherwise known, including through court-supervised proceedings in the British Virgin Islands and New York.

Last week, Voyager suspended all withdrawals, deposits and transactions on its platform due to “current market conditions”. Ehrlich said at the time that Voyager was seeking more time to explore “strategic alternatives with various interested parties.”

Several other companies, including Celsius, Babel Finance and Vauld, have taken similar action. On Tuesday, Vauld received a takeover offer from rival firm Nexo after suspending his services.

The crypto market is in the grip of a severe liquidity crunch as platforms struggle to cope with a flood of customer withdrawals amid a sharp drop in digital currency prices.

The crypto’s decline began with a large drop in risky assets as the Federal Reserve embarked on monetary tightening, and accelerated after the collapse of Terra, a so-called stablecoin that was worth around $60. billions of dollars at its peak.

Bitcoin, the world’s largest token, had its worst month on record in June, plunging 38%. Investors are preparing for a much longer downturn in digital currencies known as the “crypto winter”.

Restructuring plan

Voyager said the move would allow it to implement a restructuring process so customers can be reimbursed.

If all goes according to plan, users would receive a combination of crypto in their accounts, proceeds from the recovery of funds from Three Arrows Capital, shares of the newly reorganized company, and Voyager tokens.

Customers with U.S. dollar deposits will regain access to their funds once a reconciliation and fraud prevention process with Metropolitan Commercial Bank is completed, Voyager said.

Alameda Research, the quantitative trading boutique of billionaire Sam Bankman-Fried, had extended Voyager to line of credit worth $500 million in cash and crypto last month in a futile attempt to tide over the company.

Alameda was listed as Voyager’s largest creditor in the bankruptcy filing on Tuesday, with an unsecured claim of $75 million.

Bankman-Fried, who also founded crypto exchange FTX, has become a lender of last resort for the struggling industry. He recently struck a deal giving FTX the option to buy crypto lending firm BlockFi for up to $240 million – a dramatic drawdown from the $3 billion it was last valued at. in private.

Some have compared Bankman-Fried’s efforts to John Pierpont Morgan’s role in saving Wall Street lenders from collapse after a series of bank runs known as the Panic of 1907, which preceded the creation of the Fed. .

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