Crypto lender Voyager addresses customers’ anger in the first bankruptcy hearing

Representations of cryptocurrencies and the Voyager Digital logo are seen in this illustration taken July 7, 2022. REUTERS / Dado Ruvic / Illustrations

(Reuters) – Bankruptcy lender Voyager Digital described a difficult relationship with its customers in an initial bankruptcy hearing on Friday, saying they had received threats after freezing customers’ cryptocurrencies.

At the company’s first bankruptcy hearing for U.S. bankruptcy judge Michael Wiles in Manhattan, Voyager attorney Christopher Marcus of Kirkland & Ellis said the company had proposed a bankruptcy restructuring plan as early as possible to reassure customers that they had not “lost everything” after the company froze accounts. their.

Voyager filed for bankruptcy in Manhattan on Tuesday, blaming a recent downturn in the crypto markets that led to a freeze on customer withdrawals. The company said it had 3.5 million active users and over $ 5.9 billion in cryptocurrency assets at the time of filing.

The recent crash led to another crypto lender, Three Arrows Capital (3AC), filing for bankruptcy in the British Virgin Islands. Two others, Celsius Network and Vauld, have blocked customers from withdrawing cryptocurrencies.

Voyager’s relative silence before the bankruptcy filing led to some customers’ anger escalating into personal threats against the company’s management and their families, Marcus said.

“We are focused on a way forward,” Marcus said. “It is not right to believe that there is no hope.”

The bankruptcy plan, which was submitted on Wednesday, describes Voyager’s attempt to find an external buyer or to partially repay the customers. According to the plan, if no buyer shows up, Voyager will provide its customers with all existing Voyager tokens, 100% of the company’s shares, any proceeds from a $ 650 million dispute with 3AC, and a partial refund of the specific cryptocurrency to be determined. . kept on their accounts.

While Voyager tried to reassure customers, it also told Wiles that customers did not own the specific cryptocurrencies in their accounts. Voyager considers these assets to be the company’s property, and states that customers have unsecured claims on the value of these assets.

Voyager distinguished between cryptocurrencies and the proportion of customer accounts held in cash, which they did not claim.

Customers’ cash accounts were held in a $ 350 million mixed account with Metropolitan Commercial Bank, and Voyager will not disrupt the cash account unless it has concerns about fraudulent customer withdrawals, said Josh Sussberg of Kirkland.

Wiles said the case presented several new legal issues, including Voyager’s position that it owned the cryptocurrency assets. The judge questioned whether Voyager had even filed the right type of bankruptcy case, suggesting that it met the criteria for winding up as a broker-dealer with protected customer accounts.

Sussberg said that a traditional Chapter 11 restructuring would be better for customers. A liquidation of broker-dealers would stop Voyager’s operations completely and result in many costly lawsuits that no one benefits from, Sussberg said.

The case is Voyager Digital Holdings Inc, U.S. Bankruptcy Court for the Southern District of New York, No. 22-10943,

For Voyager: Josh Sussberg, Christopher Marcus and Christine Okike from Kirkland & Ellis

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