Voyager Digital (TSX.VOYG) went into Chapter 11 in both the U.S. Bankruptcy Court of the Southern District of New York yesterday, and intends to do the same in Ontario as per the Creditors Arrangement Act.
This comes as consequence of the liquidity problems experienced last week by Three Arrows Capital, which led to a default on monies owed. Despite all attempts to shore up existing capital and even find more with a recent deal with Alameda, it turns out that the company’s next best move for its shareholders was bankruptcy.
“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,” said Stephen Ehrlich, chief executive officer of Voyager Digital.
Voyager Digital is a cryptocurrency platform in the United States. It offers over 100 different cryptocurrencies on its mobile app.
It’s interesting and rather indicative of how swiftly the tides can turn in terms of cryptocurrency. This time last year, this company dipped into the $13.50 range and would climb again before the Terra-Luna collapse would spring the next crypto-winter. Now trading has been halted at $0.335.
At present, the company has over $110 million of cash and crypto on hand, which will help keeps the lights on and allow it to maintain its daily operations while the company cycles through the Chapter 11 process. Voyager also has $350 million of cash leftover for customers account at Metropolitan Commercial Bank. That’s in addition to the $1.3 billion in cryptoassets the company has on its platform, and the claims against Three Arrows, which are more than $650 million.
Voyager Digital’s subsidiary Voyager Digital LLC sent a notice of default to 3AC for failing to make the payments on its loan of 15,250 bitcoin and $350 million in USDC. Now Voyager is busy looking for ways to get their money from 3AC, including going through court processes in the British Virgin Islands.
Recently, the court in the British Virgin Islands ordered 3AC to liquidate. Three Arrows was a big name in last year’s cryptocurrency bull run, where firms would rack up the leverage and make big bets, which would ultimately blow up in their faces when the market turned and the bubble burst.
The company bankruptcy reorganization plans include giving account access and value back to customers. Customers holding crypto accounts with the company will receive proceeds from the 3AC recovery, common shares in the newly reorganized company and Voyager Digital tokens. The company also intends to retain all of its employees, continue to offer benefits and programs without any disruptions. Until Voyager gets the court’s nod for all of these routine requests, trading deposits, withdrawals and loyalty rewards on the platform will be suspended.