Voyager Digital, a cryptocurrency lending platform, declared bankruptcy late Tuesday under Chapter 11 of the United States Bankruptcy Code.
Reorganization Petition
As another major player declares bankruptcy, crypto companies continue to struggle with solvency. Voyager Digital, a well-known cryptocurrency broker platform, is the latest victim of the bear market and has filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in New York’s Southern District. Chapter 11 will allow for reorganization and the proposal of a payment plan for creditors over time.
Initial Reorganization Strategy
The company estimates that it has over $110 million in cash and cryptocurrency on hand, with an additional $350 million in cash held in the For Benefit of Customers account at Metropolitan Commercial Bank. Furthermore, it claims that the crypto assets held on the platform are worth nearly $1.3 billion. However, Three Arrows Capital retains a sizable portion of its assets (3AC). For the time being, the reorganization plan entails taking over account access and focusing on returning value to customers.
Customers with crypto in their accounts will initially receive proceeds for 3AC recovery, common shares in the newly reorganized company, and Voyager tokens. Customers can choose how much common equity and cryptocurrency they want to receive. Customers with USD in their accounts, on the other hand, will only receive funds after a reconciliation and fraud prevention process with Metropolitan Commercial Bank is completed.
3AC’s Problems Affecting Voyager
During the 2022 bear market, crypto hedge fund 3AC was one of the worst-affected firms. The firm had to be liquidated less than a week ago after struggling to stay solvent following the Terra LUNA debacle. The company has also defaulted on a loan from Voyager Digital, which lent the distressed fund $15,250 BTC and $350 million in USDC stablecoins. Voyager has already served 3AC with a default notice for the total loan amount of approximately $650 million.
Stephen Ehrlich, CEO of Voyager, spoke about the decision to reorganize: This comprehensive reorganization is the most effective way to safeguard platform assets and maximize value for all stakeholders, including customers. The prolonged volatility and contagion in the crypto markets over the last few months, as well as Three Arrows Capital’s default on a loan from the Company’s subsidiary, Voyager Digital, LLC, necessitate prompt and decisive action.
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