Voyager Digital files for bankruptcy protection as the cryptocurrency crisis deepens
Voyager Digital has filed for US bankruptcy protection, the latest victim of a sharp drop in cryptocurrency prices that has triggered a crisis in the digital assets market.
The Toronto-listed broker and lender filed for Chapter 11 bankruptcy late Tuesday in New York federal court after suffering losses of more than $ 650 million on a loan to Three Arrows Capital, the failed crypto investor.
The collapse of Voyager came less than a week after it suspended trading and prevented customers from withdrawing money.
Singapore-based Three Arrows, known for its aggressive bets that cryptocurrencies would rise, had borrowed heavily from major industrial players to increase their market efforts, leaving it seriously under water when digital token prices fell. The prices of leading cryptocurrencies have fallen around 70 percent from the top late last year.
The company went bankrupt despite a rescue loan last month from Alameda Research, the trading company controlled by FTX founder Sam Bankman-Fried. Voyager had withdrawn the maximum allowed $ 75 million in a single 30-day period, making Alameda the largest unsecured creditor, the bankruptcy documents showed.
Voyager’s collapse will be better known since the company had a large customer base among do-it-yourself crypto investors. At the end of March, debt was $ 5.7 billion. The Chapter 11 petition seeks to provide Voyager with protection against legal claims while pursuing a restructuring.
The company said in the filing that it has more than 100,000 creditors and liabilities of between $ 1 and $ 10 billion. It owes nearly $ 1 million to Google, the records showed, while the rest of its largest unsecured creditors are customers.
Voyager said it had $ 110 million in cash and “owned cryptocurrencies” at hand, plus $ 1.3 billion in cryptocurrencies on the platform.
Subject to legal approval, they hope to repay customers with “a combination” of cryptocurrencies, income from Three Arrows’ bankruptcy, shares in the company when it returns from insolvency and “Voyager tokens”.
The company said it also has $ 350 million of customers’ cash in US dollar deposits in an omnibus account with Metropolitan Commercial Bank in New York. Clients will be paid back after “a reconciliation and fraud prevention process”, it says.
Metropolitan said the Voyager customer funds it held are protected by US Federal Deposit Insurance, for up to $ 250,000 per depositor for each account ownership category. The account does not contain cryptocurrency or other assets, add it. Voyager previously said that the FDIC would repay “USD funds” in the event of “the company’s … failure”.
Stephen Ehrlich, CEO of Voyager, said in the wake of the filing that “we have great faith 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 decisive action.”
The downturn has also affected New Jersey-based lender Celsius, which has frozen customer withdrawals, and rival BlockFi, which also lent money to Three Arrows and secured a rescue loan from FTX that gives the stock exchange the right to buy the company.
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