On July 6th, 2022, Voyager Digital announced that the cryptocurrency brokerage firm is filing for Chapter 11 bankruptcy. This was done as a “a voluntary Chapter 11 process to maximize value for all stakeholders.” Additionally, all of Voyager Digital’s main subsidiaries “filed voluntary petitions for reorganization under Chapter 11” with the Southern District of New York Bankruptcy Court.
The company cited that the prolonged volatility and “contagion” in the Bitcoin and cryptocurrency markets along with the default of Three Arrows Capital (3AC) on a loan from one of Voyager’s subsidiaries, Voyager Digital LLC, is the main culprit for this decision. After being sent a notice of default, 3AC failed to make the required payments on a loan of 15,250 BTC and $350 million USDC.
CEO Stephen Ehrlich states that this decision to get ahead of the issue will provide an “efficient and equitable” plan of action for the company’s recovery.
The company’s plan is currently “subject to change” as developments occur and will require the Court’s approval.
Voyager’s proposed plan involves granting customer’s the ability to access their accounts again. Additionally, customers with Bitcoin and other cryptocurrencies in their accounts will receive their funds back, proceeds from the 3AC recovery, common shares in the newly reorganized company, and Voyager tokens.
Board members are also discussing whether or not to allow customers the option to elect the proportion of common equity and other funds (Bitcoin and cryptocurrency) that they will receive.
All customers with USD deposits in their Voyager accounts are planned to receive access to those funds in the near future after Metropolitan Commercial Bank performs a reconciliation and fraud prevention process.
From the Voyager report, the company currently has over $110 million of cash and crypto assets that will be used for providing liquidity and support the company’s day-to-day operations. Approximately $350 million of cash is held in the For Benefit of Customers (FBO) account at Metropolitan Commercial Bank.
Additionally, Voyager has around $1.3 billion worth of Bitcoin and other crypto assets on its own platform with more than $650 million worth of claims against 3AC.
From Voyager’s disclosed filing, the company currently owes $75 million to Sam Bankman-Fried’s Alameda Research and about $960,000 to Google. Alameda Research recently provided Voyager with a lifeline of $485 million. At this time, Voyager did not reveal other firms that the company borrowed money from.