Crypto lender Voyager Digital files for bankruptcy

After temporarily suspending operations last week, Voyager Digital filed for bankruptcy under Chapter 11 in the Southern District Court of New York late Tuesday. This move comes after the firm has revealed its exposure to the Three Arrows Capital (3AC) hedge fund.

In its last statement, Voyager announced that such a measure comes under its Plan of Reorganization. "While I strongly believe in this future, the prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital (3AC) on a loan from the Company's subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now. The chapter 11 process provides an efficient and equitable mechanism to maximize recovery", said Stephen Ehrlich, Voyager CEO.

According to Voyager’s Chapter 11 bankruptcy filing, its estimated assets are somewhere between $1 billion and $10 billion with the liabilities worth approximately the same value, while the estimated number of its creditors is 100,000.

Under Chapter 11, struggling businesses are allowed to resolve problems through a reorganization plan while remaining operational.

Last Friday, July 1, Voyager Digital announced that it was temporarily "suspending trading, deposits, withdrawals, and loyalty rewards", due to 3AC's failure to make the required payments on its loan. “Voyager is actively pursuing all available remedies for recovery from 3AC, including through the court-ordered liquidation process in the British Virgin Islands”, the statement reads.

Four days before, Voyager issued a notice of default to 3AC, which had failed to make the payments on its $675 million worth of loan (this loan constitutes 58% of Voyager's total loan book). The bankruptcy filing shows that Voyager also spent $75 million of its $500 million loan taken from Alameda Research in June to cover the losses from its exposure to 3AC.

The Voyager CEO assured in a Twitter thread that “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”.

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