Crypto lender Voyager files for bankruptcy protection. Bitcoin rises by over 3%.

Cryptocurrency lender Voyager Digital has filed for bankruptcy protection – becoming the second high-profile crypto firm to do so in recent days – blaming volatility and contagion in the market, as well as the collapse of crypto hedge fund Three Arrows Capital.

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[1].

Voyager Digital Ltd. today announced that it has commenced a voluntary Chapter 11 process to maximize value for all stakeholders. As part of this process, the Company and its main operating subsidiaries filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court of the Southern District of New York (the “Court”).
 
“This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers,” said Stephen Ehrlich, Chief Executive Officer of Voyager. “(…) 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.”
 
The proposed Plan of Reorganization (“Plan”) would, upon implementation, resume account access and return value to customers. Under this Plan, which is subject to change given ongoing discussions with other parties, and requires Court approval, 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. The plan contemplates an opportunity for customers to elect the proportion of common equity and crypto they will receive, subject to certain maximum thresholds.

Customers with USD deposits in their account(s) will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.
 
The Company continues to evaluate all strategic alternatives to maximize value for stakeholders.
 
The Company has over $110 million of cash and owned crypto assets on hand, which will provide liquidity to support day-to-day operations during the Chapter 11 process, in addition to more than $350 million of cash held in the For Benefit of Customers (FBO) account at Metropolitan Commercial Bank. Voyager also has approximately $1.3 billion of crypto assets on its platform, plus claims against Three Arrows Capital (“3AC”) of more than $650 million.
 
Voyager previously announced that its subsidiary, Voyager Digital LLC, issued a notice of default to 3AC for failure to make the required payments on its previously disclosed loan of 15,250 BTC and $350 million USDC. Voyager is actively pursuing all available remedies for recovery from 3AC, including through the court-supervised processes in the British Virgin Islands and New York.
 
The Company also announced the appointment of a four new independent directors.
 
As part of the reorganization process, the Company will file customary „First Day” motions to allow it to maintain operations in the ordinary course. Voyager intends to pay its employees in the usual manner and continue their primary benefits and certain customer programs without disruption. The Company expects to receive court approval for all these routine requests. Trading, deposits, withdrawals and loyalty rewards on the Voyager platform remain temporarily suspended.

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[1] The amounts are as of June 30, 2022, and are preliminary, non-reviewed and unaudited, and subject to final adjustments following completion of quarterly and year-end close procedures.