Bankrupt crypto lender Voyager will sell assets to Sam Bankman-Fried’s FTX

Customers of beleaguered cryptocurrency lender Voyager Digital can take some solace in news that FTX, the bitcoin exchange founded by billionaire Sam Bankman-Fried, will take over the company’s assets after winning a bankruptcy auction.

After several rounds of bidding, FTX’s US subsidiary was selected as the highest bidder for Voyager’s assets, the companies said in a statement late Monday. The bid was valued at approximately $1.4 billion, a figure that includes $1.3 billion for the fair market value of Voyager’s digital assets, plus an “additional consideration” of $111 million in expected incremental value.

Voyager declared Chapter 11 bankruptcy in July after a tumultuous fall in digital currency prices left it unable to redeem withdrawals from its customers. The firm’s demise stemmed in part from the collapse of Three Arrows Capital, a so-called hedge fund that took loans from other institutions, such as Voyager, to make risky gambles on tokens — including the collapsed stablecoin terraUSD. In June, 3AC defaulted on loans from Voyager worth $670 million.

Voyager hinted at a possible transition of its clients to FTX US, saying the exchange “will enable clients to trade and store cryptocurrency following the conclusion of the company’s Chapter 11 proceedings.” The asset purchase agreement will be presented to the US Bankruptcy Court for the Southern District of New York for approval on October 19. The sale of Voyager’s assets to FTX US is subject to a vote of creditors, as well as “other customary closing conditions,” according to the statement.

The move marks a potential step towards compensating users of Voyager, who have few legal options to get paid the crypto they stored on the platform before it froze customer withdrawals. In bankruptcy proceedings, customers of crypto platforms are treated as unsecured creditors, meaning they are not actually entitled to the crypto they have purchased, and like other creditors must go through the courts to try to get their money back. The creditors of Mt. Gox, which went under in 2014, is still waiting to be repaid.

Voyager previously claimed on its website and in marketing materials that users’ funds were protected by the Federal Deposit Insurance Corporation, but this was technically not true – Voyager’s cash deposits are held at Metropolitan Commercial Bank, a New York-based lender. FDIC insurance only covers bank failure, not Voyager. In July, the FDIC and the Federal Reserve sent Voyager a cease and desist letter ordering it to stop claiming it was FDIC insured.

In the crypto winter of 2022, Bankman-Fried has emerged as a savior for a number of firms that fell victim to the falling value of digital tokens and resulting liquidity problems on their platforms. The 30-year-old quant trader-turned-crypto extraordinaire has been shopping for bargains amid the industry’s recent carnage.

In July, FTX signed an agreement that gives it the option to buy lender BlockFi after providing a $250 million credit line. Bankman-Fried says he still has plenty of money to spend on further deals. And he could soon receive even more, with sources telling CNBC FTX is raising another $1 billion from investors in an upcoming funding round.

– CNBC’s Kate Rooney contributed to this report