Bankrupt crypto broker Voyager Digital has agreed to return $270 million to clients

The U.S. Bankruptcy Court in New York has granted crypto brokerage firm Voyager Digital approval from the U.S. Bankruptcy Court to return $270 million to affected clients. The Wall Street Journal reports.

On Thursday, President Micheal Wiles gave Voyager the nod to return funds to customers held in a custodial account with Metropolitan Commercial Bank (MCB).

The New Jersey-based crypto firm applied chapter 11 bankruptcy in July as crypto prices fell – creating a bank run that forced Voyager to halt withdrawals.

Following the liquidity crisis, Voyager sought court permission to accommodate customer withdrawal requests for cash held in custody at MCB.

Of the remaining funds on the platform, totaling just over $1 billion, Voyager said these belong to the bankruptcy estate, which will be distributed among all creditors.

Voyager’s collapse comes amid exposure to prominent crypto hedge fund Three Arrows Capital (3AC).

Voyager’s loan obligations unpacked

Voyager lent 3AC around 660 million dollars; but, in light of the hedge fund’s $200 million exposure to Terra, it defaulted and was unable to repay the loan.

3AC’s default prompted Voyager CEO Stephen Ehrlich to seek the help of Moelis & Company as financial advisors.

Additional loan commitments to Voyager include $34.4 million from Mike Novogratz’s investment firm Galaxy Digital and $17.5 million from digital asset lender Genesis Global Capital.

Both Galaxy Digital and Genesis Global Capital also had exposure to 3AC and Terra.

Galaxy Digital announced a $10.6 million share buyback program following its exposure to Terra in May.

Michael Moro Genesis’ CEO admitted in a series of tweets that the loans to Three Arrows had a weighted average margin requirement of over 80%, without disclosing the size of the loan.

Other reasons for Voyager’s bankruptcy may also come down to excessive customer rewards.

After a deal signed with the Dallas Mavericks, it offered crypto prices worth 100 dollarswith the company offering annual rates between 8% to 10% on more than 40 assets.

Voyager expects to close the sale process in September, with FTX Trading making an offer to buy some of Voyager’s assets as well as take on some of its customers.