- Voyager Digital has filed for Chapter 11 bankruptcy
- The Toronto-based lender has a $650+ million black hole caused by the crypto contagion
- Customers will be made whole with a combination of their holdings, funds recovered from 3AC, and Voyager tokens
Voyager Digital, the lending platform that was publicly struggling under the weight of the crypto credit crunch, has filed for bankruptcy. A day after announcing that it was processing withdrawals to customers who had requested them before the platform shut its withdrawal portal last Friday, the company has filed for Chapter 11 bankruptcy protection, estimating that it has more than 100,000 creditors and somewhere between $1 billion and $10 billion in crypto assets. The company also recorded the same range for its liabilities.
Voyager Couldn’t Find a Way Out of $650+ Million Black Hole
Voyager was known to be in serious trouble, with the collapse of Three Arrows Capital putting a more than $650 million hole in its side, adding to damage caused by the Terra collapse and leading to it halting withdrawals last Wednesday as it tried to source a rescue package.
Such a package has not been forthcoming however, although some perceived a ray of light yesterday when the company said it would honour withdrawals requested before it froze them. However, as reported by FullyCrypto yesterday, this was only ever seen as a legal necessity and the writing was still very much on the wall, writing that was confirmed by Voyager Digital CEO Stephen Ehrlich early this morning:
Voyagers, today we began a voluntary financial restructuring process to protect assets on the platform, maximize value for all stakeholders, especially customers, and emerge as a stronger company. Voyager will continue operating throughout.https://t.co/TxlO4eua8E
— Stephen Ehrlich (@Ehrls15) July 6, 2022
Ehrlich said in a press release that the bankruptcy filing represented “the best way to protect assets on the platform and maximize value for all stakeholders, including customers”, adding that “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.”
Customers Will Get Funds Back…Kind Of
Ehrlich added that chapter 11 process “provides an efficient and equitable mechanism to maximize recovery”, words that will likely not fill customers’ hearts with joy, given the amount of creditors and the fact that the company simply doesn’t have the money to make them whole.
The suggested plan would see customers paid out in a combination of the cryptocurrency in their account; proceeds from the Three Arrows Capital recovery, which could take months; common shares in the “newly reorganized Company” and Voyager tokens, neither of which are going to offer any kind of guaranteed value.
Voyager Digital customers will USD in their accounts will fare a little better, with access to those funds being opened after a reconciliation and fraud prevention process is completed with Voyager’s partner bank.
The news puts a tweet from Ehrlich from mid-June into context, and shows how, once again, hubris has potentially been behind the undoing of another crypto lender:
— Stephen Ehrlich (@Ehrls15) June 13, 2022