Last Updated: 6 July 2022
Voyager Digital has filed for bankruptcy in New York, according to the bankruptcy petition filed by the cryptocurrency company.
It concerns a so-called Chapter 11 type of bankruptcy petition. Chapter 11 bankruptcy proceedings stop all civil lawsuits and allow companies to drawup a recovery plan while they remain operational.
More than 100,000 creditors
The company has between $1 billion and $10 billion in cryptocurrency assets on its balance sheet. On the other hand, they also have between $1 billion and $10 billion in estimated liabilities. There are expected to be more than 100,000 creditors.
Three subsidiaries named Voyager Digital Holdings, Voyager Digital LLC and Voyager Digital, Ltd. are seeking protection. Bankruptcy petitions have been filed for each of these three companies in the bankruptcy court of the Southern District of New York.
According to these documents, the company is represented by Kirkland and Ellis LLP.
Friday stopped Voyager recordings
The problems came to light just before the weekend. Last Friday, Voyager stopped withdrawals, deposits and trading of crypto currency. Supposedly, they did this because of the current market conditions.
“This was an extremely difficult decision, but we believe it is the right one given the current market conditions,” CEO Stephen Ehrlich said at the time. Just now, Ehrlich shared that the company is voluntarily entering into a restructuring.
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
Three Arrow Capital drags everyone down
Voyager shared its bed with Three Arrow Capital (3AC). The latter company had a loan of 650 million dollars with Voyager but cannot repay it. In the meantime, 3AC has also filed for bankruptcy.
In the press release about this ‘restructuring,’ it can be read that 3AC played a major role in the fall of Voyager. Ehrlich:
“This comprehensive reorganisation is the best way to protect assets on the platform and maximise value for all stakeholders, including customers. Voyager’s platform was built to enable investors to access 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 by Three Arrows Capital (“3AC”) on a loan from the company’s subsidiary, Voyager Digital LLC, requires us to take deliberate and decisive action now. The Chapter 11 process provides an efficient and equitable mechanism to maximise recovery.”
According to Frances Coppola, nearly half of Voyager’s assets consisted of outstanding loans. Approximately 60% of these loans are (after bankruptcy, ‘came’ is perhaps a better word) on behalf of 3AC.
Broker and loan company
Voyager’s revenue model can be compared to BlockFi. It is a broker, so not only can you buy and sell crypto, but you can deposit crypto to earn interest on it also. They then lend out this crypto to, for example, 3AC. In order to lend out crypto, you need to offer collateral to give the company some security. In the case of 3AC, this collateral was not enough, and now Voyager is on the verge of collapse.
In recent weeks, Crypto companies, and lenders in particular, have had to deal with solvency problems, which has prevented users from withdrawing their money. Celsius started this trend last month and announced mid-June that it would suspend withdrawals. In recent days, CoinLoan, CoinFLEX and Voyager have all had restrictions or even stopped withdrawals completely.