Crypto Broker Voyager Digital Files For Bankruptcy After Three Arrows Collapse

Cryptocurrency broker Voyager Digital on Tuesday filed for bankruptcy in the wake of the collapse of leading crypto hedge fund Three Arrows Capital (3AC). Voyager’s Chapter 11 filing comes just days after 3AC filed for bankruptcy — and nearly a week after 3AC defaulted on a loan provided by Voyager.

In a press release, Voyager Digital said that it has approximately $1.3 billion worth of crypto assets on the platform, $110 million in cash and crypto assets, and $350 million in an FBO (for-benefit-off) account. Customer. It also says that 3AC is still owed more than $650 million.

Voyager CEO Stephen Ehrlich attributed the company’s financial struggles to “prolonged volatility and transition in cryptocurrency markets” as well as 3AC’s failure to repay its debt. “The Chapter 11 process provides an efficient and equitable mechanism for maximizing recovery,” Ehrlich said.

Companies like Voyager Digital use Chapter 11 filings when they plan to restructure their loans while they are still current. Voyager Digital outlined a proposed course of action in its press release, saying it would allow customers to hold “a combination of crypto held in their accounts”, funds recovered from 3AC, company shares and Voyager tokens. (which is currently worth about 21 cents). each). The company says that customers who currently have USD deposits in their accounts will only gain access “after the completion of the reconciliation and fraud prevention process with the Metropolitan Commercial Bank.” The plan still needs to be approved by the court.

Voyager halted all trading, withdrawals and deposits after announcing last week that 3AC had failed to repay its loan. In June, Sam Bankman-Fried, the billionaire CEO of trading firm FTX and Alameda Research, extended a $500 million line of credit to Voyager in an effort to help it tackle an uncertain market. Bankman-Fried’s Alameda Research also invested $75 million in Voyager last year, which the Chapter 11 filing lists as the company’s largest unsecured claim.

The crypto crash is showing just how intertwined crypto firms really are, with the temporary shutdowns of cryptocurrency lenders Celsius and Babel Finance ahead of the bankruptcy filings of Voyager and 3AC. Earlier this week, crypto lending and trading startup Wold also suspended all transactions, but it looks like we are yet to see how far the outcome will go.

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