The cryptocurrency broker Voyager Digital applied for Chapter 11 bankruptcy protection, and became the latest victim of the financial turmoil that has hit the world of cryptocurrency as token values have plummeted and economic conditions have soured for more risky assets.
Crypto broker Voyager Digital is filing for bankruptcy as the industry falters
“We have great faith in the future of the industry, but the long-standing volatility of the crypto markets, and the standard of Three Arrows Capital, require us to take this crucial action,” Voyager CEO Stephen Ehrlich said in a tweet on Wednesday.
Under Voyager’s proposed bankruptcy plan, customers who had cryptocurrencies in their accounts will receive a combination of crypto, revenue from the funds raised from Three Arrows, shares in the recently reorganized company and Voyager tokens, the company said. Customers with cash deposits in their accounts will have access to these funds after the company and Metropolitan Commercial Bank completed a reconciliation and fraud prevention process, Voyager said.
Voyager filed for reorganization at the U.S. Bankruptcy Court in the Southern District of New York on Tuesday.
The filing shows that Voyager has more than 100,000 creditors, and shows assets and liabilities of between 1 billion and 10 billion dollars.
The company said it has about $ 1.3 billion in cryptocurrencies on its platform and requires more than $ 110 million in cash and owned cryptocurrencies on hand, which will help it maintain day-to-day operations during the bankruptcy process. Another $ 350 million in cash held on behalf of customers sits in an account with Metropolitan Commercial Bank, the company said in a statement.
Voyager’s economic struggle highlights the crypto industry’s high level of interconnection. As crypto-related firms borrow from and invest in each other, the risk for investors increases as errors can fall and spread.
The bankruptcy marks another episode in the rocky years of crypto. Although older financial markets have also suffered from a number of economic challenges – including soaring inflation, shocks in the supply chain from the pandemic and war in Ukraine, and the Fed’s aggressive money tightening – cryptocurrencies have been particularly hard hit as investors flee to safer assets and prices fluctuate.
This week, cryptocurrency lender Vauld halted all withdrawals in another case of the sector’s wider breakdown, which included the cratering of TerraUSD’s stablecoin and a freeze on withdrawals from the crypto bank Celsius.
Voyager only revealed its financial problems in late June after reports circulated about the Three Arrows ‘failure to meet lenders’ requirements to show extra funds when the cryptocurrencies exploded. In a much-publicized announcement, Voyager said it had issued a three-year default notice to Three Arrows and intended to recover the funds. The loan took the form of 15,250 bitcoin and $ 350 million of stablecoin USDC, a digital token whose value is linked to the dollar. The value of the borrowed bitcoin in Wednesday’s prices amounts to more than 300 million dollars.
Shortly afterwards, however, a court in the British Virgin Islands ordered the liquidation of Three Arrows after they failed to repay creditors when the value of bitcoin and other cryptocurrencies crashed. And last week, the global consulting firm Teneo set up a website for potential creditors of Three Arrows Capital to file claims and receive more information about the insolvency.
Voyager said they are pursuing all available remedies to recover funds, including through law enforcement proceedings in the British Virgin Islands and New York.
