Crypto lender Voyager Digital Holdings filed for bankruptcy on Wednesday, as its exposure to beleaguered hedge fund Three Arrows Capital devastated its finances... Voyager had a massive exposure to Three Arrows Capital, which is also in the process of negotiating a bankruptcy. Three Arrows had recently defaulted on a $660 million loan from Voyager, which is also likely behind the lender’s recent filing.
[Warrick, A. Breaking: Voyager Digital Enters Bankruptcy After Three Arrows Meltdown. (Accessed July 6, 2022)].
In a Chapter 11 Bankruptcy Petition filed in the Southern District of New York, Voyager disclosed its assets are in excess of $1 Billion and it has further disclosed it has more than 100,000 creditors. For a full copy of the Bankruptcy Petition, click here. It's largest creditor is listed as Alameda Research which is holding unsecured loans worth $75 million.
In a Press Release issued at 01:12 ET today (July 6, 2022), Chief Executive Officer of Voyager, Stephen Ehrlich, said:
This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers... Voyager’s platform was built to empower investors by providing access to crypto asset trading with simplicity, speed, liquidity, and transparency. 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.
[Voyager Digital. Press Release - Voyager Digital Commences Financial Restructuring Process to Maximize Value for All Stakeholders. (Accessed July 6, 2022)].
This Press Release further provides an overview of Voyager's proposed Reorganization Plan as follows:
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.
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According to this Press Release, Voyager plans to seek the Court's permission to maintain operations during the reorganization process:
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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Regarding this, Ehrlich tweeted:
Returning to 3AC for a moment it should be noted:
The company’s subsidiary, Voyager Digital LLC, also previously issued a notice of default to 3AC for failure to make the required payments for its loan of 15,250 Bitcoin (BTC) and $350 million USD Coin (USDC). However, Three Arrows Capital is going through Chapter 15 bankruptcy proceedings and has reportedly been forced to be liquidated by the British Virgin Islands, suggesting that it could be difficult for Voyager to recover the funds it lent out. (emphasis added)
[Newar, B. Voyager Digital files for Chapter 11 bankruptcy, proposes recovery plan. (Accessed July 6, 2022)].
"Voyager’s token VGX is down 92% so far this year, and has fallen 74% in the last month alone to $0.23, data from Blockworks Research shows. The company’s stock price is down 98% in the year-to-date, and last traded at $0.35 Canadian dollars ($0.27), according to TradingView" [Nagarajan, S. Voyager Files for Bankruptcy Days After Freezing Withdrawals. (Accessed July 6, 2022)].