Justin Sullivan | Getty Images Beleaguered crypto brokerage Voyager Digital has filed for Chapter 11 bankruptcy protection, becoming the latest victim of chaos in digital asset markets. Voyager filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York on Tuesday, according to the company’s filing. The filing includes assets between $1 billion and $10 billion and liabilities in the same range. In a statement, the company said it has about $1.3 billion of crypto on its platform and holds over $350 million in cash on behalf of clients of New York’s Metropolitan Commercial Bank. Voyager suffered huge losses from its exposure to crypto hedge fund Three Arrows Capital, which collapsed last week after several companies in the industry defaulted on loans – including $650 million from Voyager. “We strongly believe in the future of the industry, but prolonged volatility in crypto markets and the default of Three Arrows Capital require us to take this decisive action,” Voyager CEO Stephen Ehrlich said in a tweet early Wednesday. Shares of the Toronto-listed company have lost nearly 98% of their value since the start of 2022. Voyager says it is still seeking to recover funds from Three Arrows Capital, or 3AC as it is otherwise known, including through legal proceedings in the British Virgin Islands and New York. Last week, Voyager suspended all withdrawals, deposits and transactions on its platform due to “current market conditions.” Ehrlich said at the time that Voyager was seeking additional time to explore “strategic alternatives with various stakeholders.” Several other companies, including Celsius, Babel Finance and Vauld, have taken similar steps. On Tuesday, Vauld received a takeover offer from Nexo, a rival company, after suspending its services. The cryptocurrency market is grappling with a severe liquidity crunch as platforms struggle to cope with a flood of customer withdrawals amid a sharp drop in digital currency prices. The declines in cryptocurrencies began with a broad drop in risk assets as the Federal Reserve began monetary tightening and accelerated after the collapse of Terra, a so-called stablecoin venture that was valued at about $60 billion at its peak. Bitcoin, the world’s largest token, had its worst month on record in June, plunging 38%. Investors are bracing for a much bigger downturn in digital currencies known as ‘crypto winter’.
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, proceeds from the capital recovery 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. Alameda Research, the quant-trading shop of billionaire Sam Bankman-Fried, had extended Voyager a $500 million credit line in cash and crypto last month in an unsuccessful attempt to turn the company around. 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 crypto exchange FTX, has become a lender of last resort for the troubled industry. It recently agreed to a deal that gives FTX the option to buy cryptocurrency lending firm BlockFi for up to $240 million — a dramatic drop from the $3 billion it was last valued at privately. Some have likened 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 founding of the Fed.
