Crypto Lender Voyager Digital Files for Chapter 11 Bankruptcy

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Published: Jul 6, 2022, 08:56 UTC

Voyager Digital has filed for bankruptcy a week after suspending withdrawals, trading and deposits

Key Insights:

Voyager Digital has a vague estimate of assets and liabilities between $1 billion and $10 billion.
The Toronto-based company has more than 100,000 creditors.
Restructuring and recompense plans have been proposed.

A week after suspending withdrawals, trading and deposits on its platform, crypto lender Voyager Digital has filed for Chapter 11 bankruptcy, becoming the second high-profile crypto company to do so in recent days.

The Toronto-based firm estimates that it has more than 100,000 creditors and somewhere between $1 and $10 billion in assets, and liabilities worth the same value.

Hot Water

Voyager Digital explained that the move is part of a ‘Plan of Reorganization’ that aims to enable clients to regain access to their accounts, which would in turn “return value to customers”. CEO Steven Ehrlich reiterated that reorganizing the company is the “best way” to protect assets on the platform so that Voyager can continue operating.

The company’s subsidiary, Voyager Digital LLC had previously issued a default notice to troubled hedge fund Three Arrows Capital (3AC) for the its failure to make required payments for a loan of 15,250 Bitcoin (BTC) and $350 million USD Coin (USDC).

Reports surfaced that Voyager’s loan book accounted for nearly half of its total assets, and roughly 60% of that loan book was comprised of loans to Three Arrows Capital.

Ehrlich confirmed that customers with crypto in their account will receive a combination of crypto, proceeds from the Three Arrows Capital recovery, common shares in the newly reorganized company, and Voyager tokens.

In addition, customers with U.S. dollars in their accounts will be able to access those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.

Notably, the company will continue to pay its employees though trading, deposits, withdrawals and loyalty rewards will remain suspended.

Crypto Market Collapse

Voyager Digital joins Three Arrows Capital in filing for bankruptcy. However, Three Arrows Capital filed a Chapter 15 petition tied to an ongoing liquidation effort ordered by a court in the British Virgin Islands, suggesting that it could be difficult for Voyager to recover the funds it lent out.

The lending platform recently entered into a $500 million loan agreement with trading firm Alameda Research to cover losses from its exposure to 3AC.

The troubled crypto exchange also claimed that it had $110 million in cash, $350 million in cash at the Metropolitan Commercial Bank, $1.3 billion in crypto and was owed $650 million from Three Arrows Capital. It did not specify liabilities.

Chapter 11 bankruptcy procedures put a hold on all civil litigation matters, allowing companies to prepare turnaround plans while remaining operational.

About the Author

Mohadesa Najumiauthor

Mohadesa Najumi is a British writer who has worked within crypto, forex, financial technology, and the stock market industry. Mohadesa received her MSc in Political Science and International Relations at the University of Amsterdam.