Crypto Broker Voyager Digital Files for Bankruptcy, Restructuring Plan Underway

On Wednesday, July 6, crypto brokerage firm Voyager Digital filed for bankruptcy proceedings becoming the second high-profile firm after Three Arrows Capital to become insolvent.

 

The parent firms, and its two affiliates - Voyager Digital LLC and Voyager Digital Holdings - filed for a Chapter 11 bankruptcy in the Southern District of New York. Commenting on the matter, Voyager Digital CEO Stephen Ehrlich said: "We strongly believe in the future of the industry but the prolonged volatility in the crypto markets, and the default of Three Arrows Capital, require us to take this decisive action”.

 

“The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan from the company's subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now,” he added.

 

Voyager, the Toronto-listed crypto broker had more than 100,000 creditors with anywhere between $1 billion to $10 billion in crypto assets under management.

 

The cryptocurrency industry has been facing severe liquidity issues, especially after the collapse of the Terra ecosystem back in May 2022. For two consecutive months, the market faced severe liquidations as a result of which several crypto lenders came under major trouble.

 

They were left either with the option to pledge more collateral or liquidate their holdings. Voyager Digital has lent hundreds of millions of dollars to hedge fund Three Arrows Capital. However, as the hedge fund failed to repay the loan, Voyager was left with no option but to liquidate.

 

Amid challenging market conditions, Voyager Digital announced its decision to temporarily suspend trading, deposits, and withdrawals. Sam Bankman-Fried, the co-founder of crypto exchange FTX U.S. extended some help in form of $75 million unsecured loans through his other company Alameda Research.

 

Voyager CEO Stephen Ehrlich also said that the company has started with restricting process to protect the assets on the platform and thus maximize the value for all stakeholders.

 

Talking about these bankruptcy proceedings, he added: “This well-established legal process whereby companies reorganize their financial obligations to emerge as stronger organizations, provides an efficient & equitable mechanism to maximize recovery. Our goal is to come out a stronger organization”.

 

He also added that customers with USD deposits in their accounts will receive access to those funds after Voyager completes a reconciliation and fraud prevention process with Metropolitan Commercial Bank.