The crypto company Voyager Digital files for Chapter 11 bankruptcy protection

The besieged crypto brokerage house Voyager Digital has applied for Chapter 11 bankruptcy protection, and has become the latest victim of chaos in digital asset markets.

Voyager began bankruptcy proceedings in the U.S. bankruptcy court in the Southern District of New York on Tuesday, according to a filing from the company. The filing shows assets of between $ 1 billion and $ 10 billion, and debt in the same area.

In a statement, the company said it has approximately $ 1.3 billion in crypto on its platform and has over $ 350 million in cash on behalf of customers of the New York Metropolitan Commercial Bank.

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

“We strongly believe in the future of the industry, but the long-standing volatility of the crypto markets, and the default of Three Arrows Capital, require us to take this crucial action,” Voyager CEO Stephen Ehrlich said in a tweet early Wednesday.

The Toronto-listed company’s shares have lost almost 98% of their value since the start of 2022.

Voyager says it is still pursuing fundraising from Three Arrows Capital, or 3AC as it is otherwise known, including through law enforcement proceedings in the British Virgin Islands and New York.

Last week, Voyager stopped all withdrawals, deposits and trading on its platform due to “current market conditions”. Ehrlich said at the time that Voyager was seeking more time to explore “strategic options with various stakeholders.”

Several other companies, including Celsius, Babel Finance and Vauld, have taken similar steps. On Tuesday, Vauld received a takeover bid from Nexo, a rival company, after suspending its services.

The crypto market is struggling with a serious liquidity crisis as platforms are struggling to meet a flood of withdrawals from customers in the midst of a sharp fall in digital currency prices.

The decline in crypto began with a broad decline in risky assets as the Federal Reserve embarked on monetary tightening, accelerating after the collapse of Terra, a so-called stackcoin investment worth around $ 60 billion at its peak.

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

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

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

Customers with US dollar deposits will regain access to their money when a reconciliation and fraud prevention process with Metropolitan Commercial Bank is completed, Voyager said.

Alameda Research, the quantum trading store of billionaire Sam Bankman-Fried, had extended Voyager’s $ 500 million cash and crypto line of credit last month in a vain attempt to get the company over.

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

Bankman-Fried, which also founded the crypto exchange FTX, has become a lender of last resort for the troubled industry. He recently agreed on a deal that would give FTX the opportunity to buy the crypto loan company BlockFi for up to $ 240 million – a dramatic drop from the $ 3 billion it was last privately valued at.

Some have compared Bankman-Peace’s efforts to the role played by John Pierpont Morgan in rescuing Wall Street borrowers from collapse after a series of bank runs known as the 1907 panic, which preceded the establishment of the Fed.