Wednesday, September 27, 2023

Crypto Broker Voyager Digital Files for Bankruptcy After Three Arrows Collapse

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Cryptocurrency broker Voyager Digital filed for bankruptcy on Tuesday following the collapse of major crypto hedge fund Three Arrows Capital (3AC). Voyager’s Chapter 11 filing comes just days after 3AC filed for bankruptcy — and about a week after 3AC defaulted on a loan provided by Voyager.

In a press releaseVoyager Digital states that it has approximately $1.3 billion in crypto assets on the platform, $110 million in cash and crypto assets on hand, and the $350 million it holds in an FBO account (For- Benefit-Of) for customers. It also says that 3AC still owes more than $650 million.

Voyager CEO Stephen Ehrlich blames the company’s financial troubles on “prolonged crypto market volatility and contagion” and 3AC’s failure to repay its debt. “The Chapter 11 trial provides an efficient and equitable mechanism to maximize recovery,” Ehrlich added.

Companies like Voyager Digital use a Submit Chapter 11 when they plan to reorganize their debt while remaining operational. Voyager Digital outlined a proposed course of action in its press release, stating that it will give customers “a combination” of the crypto held in their accounts, 3AC’s recovered funds, company stocks, and Voyager tokens (which are currently worth around 21 cents) each). The company says customers who currently have USD deposits in their accounts will not regain access “until the reconciliation and fraud prevention process has been completed with the Metropolitan Commercial Bank.” This plan has yet to be approved by the court.

Voyager has suspended all trading, withdrawals and deposits last week after announcing that 3AC had failed to repay its loan. In June, Sam Bankman-Fried, the billionaire CEO of trading firms FTX and Alameda Research, said, extended a $500 million line of credit to Voyager in an effort to help it cope with the uncertain market. Bankman-Fried’s Alameda Research also invested $75 million in Voyager last year, which is listed in the Chapter 11 filing as the company’s largest unsecured claim.

The crypto crash shows how intertwined crypto firms really are, with the temporary shutdown of cryptocurrency lenders Celsius and Babel Finance ahead of Voyager and 3AC’s bankruptcy filings. Earlier this week, crypto lending and trading startup Vauld also suspended all transactionsbut it seems we have yet to see how far the consequences will reach.

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