Voyager Digital has joined the expanding list of CeFi companies suffering losses due to exposure to Three Arrows Capital and falling crypto asset prices.
A few days after suspending trading, withdrawals, and deposits, the cryptocurrency exchange Voyager Digital has filed for Chapter 11 bankruptcy in the Southern District of New York.
According to its Chapter 11 bankruptcy petition, Voyager owes between $1 billion and $10 billion in assets to more than 100,000 creditors.
The ailing cryptocurrency exchange filed for bankruptcy on July 5 following the July 4 holiday in the United States. In a statement released on Wednesday, Voyager noted that the move is part of a “Reorganization Plan.” When executed, the proposal will allow customers to regain access to their accounts, and Voyager will “return value to customers.”
Stephen Ehrlich, the chief executive officer of Voyager, stated in a tweet on July 6 that, according to the company’s proposed plan, customers with cryptocurrency in their accounts will receive a combination of cryptocurrency, proceeds from the Three Arrows Capital (3AC) recovery, common shares in the newly reorganised company, and Voyager tokens.
Customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens.
— Stephen Ehrlich (@Ehrls15) July 6, 2022
In addition, he confirmed that customers holding U.S. dollars in their accounts will have access to those monies after a “process of reconciliation and fraud prevention with Metropolitan Commercial Bank” is finished.
Ehrlich stated in the same Twitter thread that he believed Chapter 11 was the best option for his clients, taking into account all variables, and that the action would safeguard assets on the platform and Voyager would continue to operate.
As part of the reorganisation process, Voyager will file “First Day” motions that will allow the firm to continue operations.
Voyager stated that it intended to pay its staff as usual and continue their “principal benefits and certain client programmes without interruption” despite the suspension of trading, deposits, withdrawals, and loyalty awards.
After entering into a $500 million loan deal with trading firm Alameda Research to cover losses from its exposure to crypto venture capital firm 3AC, Voyager and its clients began to experience headwinds.
The following day, the platform cut its daily withdrawal limit to $10,000, then on July 1, it stated it will cease trading, deposits, withdrawals, and loyalty rewards distributions.
Voyager Digital LLC, a subsidiary of the corporation, has earlier issued a notice of default to 3AC for failing to make payments on a loan of 15,250 Bitcoin (BTC) and $350 million USD Coin (USDC).
However, Three Arrows Capital is undergoing Chapter 15 bankruptcy procedures and was apparently forced to liquidate by the British Virgin Islands, indicating that it may be challenging for Voyager to recoup the monies it paid out.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
