Crypto firm Voyager Digital files for Chapter 11 bankruptcy protection

Voyager said its platform holds about $1.3 billion worth of cryptographic information and more than $350 million in cash on behalf of clients of New York’s Metropolitan Commercial Bank.

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Beleaguered crypto brokerage Voyager Digital has filed for Chapter 11 bankruptcy protection, becoming the latest casualty of the chaos in the digital asset markets.

Voyager filed for bankruptcy Tuesday in the U.S. Bankruptcy Court for the Southern District of New York, the company said in a statement. The documents list assets between $1 billion and $10 billion and liabilities in the same range.

In a statement, the company said it holds about $1.3 billion worth of crypto on its platform, along with more than $350 million in cash on behalf of Metropolitan Commercial Bank clients in New York.

Voyager suffered huge losses due to exposure to crypto hedge fund Three Arrows Capital, which went bankrupt last week after defaulting on loans from a number of industry firms, including $650 million from Voyager.

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

Since the start of 2022, shares of the Toronto-listed firm have lost nearly 98% of their value.

Voyager says it is still seeking funds from Three Arrows Capital, or 3AC, as it is otherwise known, including through lawsuits in the British Virgin Islands and New York.

Last week Voyager suspended all withdrawals, deposits and trading on its platform due to “current market conditions”. At the time, Ehrlich said Voyager was seeking additional time to explore “strategic alternatives with various stakeholders.”

Several other firms, including Celsius, Babel Finance and Vauld, have made similar moves. On Tuesday, Vauld received a takeover offer from Nexo, a rival firm, after suspending its services.

The crypto market is grappling with a severe liquidity crisis as platforms grapple with the flow of customer withdrawals amid a sharp drop in digital currency prices.

The fall in crypto began with a broad drop in risk assets as the Federal Reserve began tightening monetary policy and gained momentum after the collapse of Terra, a so-called stablecoin that was worth about $60 billion at its peak.

Bitcoin, the world’s largest token, experienced its worst month ever in June, plunging 38%. Investors are bracing for a much longer decline in digital currencies, known as the “cryptozyme.”

Restructuring plan

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

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

Customers with US dollar deposits will regain access to their funds once the reconciliation and fraud prevention process with Metropolitan Commercial Bank is complete, Voyager said.

Last month, Alameda Research, the quantum trading shop of billionaire Sam Bankman-Fried, extended Voyager a $500 million credit line in cash and crypto in a futile attempt to clean up the company.

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

Bankman-Fried, who also founded the crypto exchange FTX, has become the lender of last resort to the troubled industry. It recently agreed to a deal that gives FTX the option to acquire crypto-lending company BlockFi for up to $240 million — a significant drop from the $3 billion it was last valued at privately.

Some have compared Bankman-Fried’s efforts to the role John Pierpont Morgan played in saving Wall Street lenders from collapse after a series of bank runs known as the Panic of 1907, which preceded the creation of the Fed.

Crypto firm Voyager Digital files for Chapter 11 bankruptcy protection

Source link Crypto firm Voyager Digital files for Chapter 11 bankruptcy protection

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