Toronto-based crypto lender Voyager filed for Chapter 11 bankruptcy in New York this week. Voyager is amongst the latest in a series of crypto loan startups that have been hit by insolvency by the 2022 global financial crisis.
Voyager Digital Holdings, Inc, Voyager Digital, LLC and Voyager Digital Ltd. have all filed for bankruptcy. Voyager has suspended all trading, withdrawals, and deposits on the platform since July 1, 2022 in order to make room for a voluntary financial restructuring process.
The Chapter 11 bankruptcy protection filing made on late July 5th 2022 estimates that Voyager has more than 100,000 creditors and between $1 to $10 billion in both assets and its liabilities. The filing also reports that “funds will be available for distribution to unsecured creditors”.
In filing for bankruptcy, Voyager has joined Three Arrows Capital. However, Three Arrows has filed a Chapter 15 petition related to an ongoing liquidation effort, ordered by court in the British Virgin Islands. Reports have shown that 60% of its loan book is composed of loans to Three Arrows.
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
Voyager CEO Steven Ehrlich has posted on Twitter reassuring users that Voyager users with currency in their accounts will receive compensation, including 3AC recovery, common shares in the newly-reorganised Voyager, and Voyager tokens.
There has been existing public scrutiny of Voyager’s business practices prior. In previous marketing materials, Voyager has said that investor deposits were protected by Federal Deposit Insurance Corporation (FDIC) insurance. FDIC does not cover cash converted to stablecoin, and only starts in the event of a bank failure, which does not guarantee Voyager to be FDIC-protected.
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An official press release from Ehrlich states that a voluntary petition for reorganisation “is the best way to protect” Voyager’s assets. Amongst Voyager Digital, Ltd.’s equity holders are two companies associated with crypto exchange FTX founder Sam Bankman-Fried who either has extended credit lines or has bailed out remaining crypto companies.
The press release mentions “Voyager has approximately $1.3 billion of crypto assets on the platform, more than $350 Million of cash held in the FBO Account for customers at Metropolitan Commercial Bank, and claims against three arrows capital of more than $650 million”, with no specifics on such liabilities. The filing mentions that Voyager also owes Google nearly $1 million.
Voyager’s stock has traded above $20 since last November, but has fallen below the $1 amount since last month. Voyager is the second high-profile crypto lender to succumb to this crypto winter, joining Celcius, CoinLoan, and CoinFLEX.