Voyager said it has nearly $1.3 billion in cryptocurrency on its platform and has more than $350 million in cash on behalf of clients at the Metropolitan Commercial Bank in New York.
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embattled crypto broker Voyager Digital has filed for Chapter 11 bankruptcy protection, becoming the latest victim of chaos in the digital asset market.
Voyager began bankruptcy proceedings in US Bankruptcy Court in the Southern District of New York on Tuesday, according to a filing from the company. The filing lists assets between $1 billion and $10 billion, and liabilities in the same range.
In a statement, the company said it has nearly $1.3 billion in cryptocurrency on its platform and more than $350 million in cash on behalf of clients at the Metropolitan Commercial Bank in New York.
Voyager has suffered huge losses from exposure to crypto hedge fund Three Arrows Capital, which collapsed last week after defaulting on loans from a number of companies in the industry — including $650 million from Voyager.
“We strongly believe in the future of the industry, but the prolonged volatility in the cryptocurrency markets, and the default at Three Arrows Capital, require us to take this decisive action,” Voyager CEO Stephen Ehrlich said in a tweet early Wednesday.
The Toronto-listed company’s shares have lost nearly 98% of their value since the start of 2022.
Voyager says it is still seeking to recover the funds from Three Arrows Capital, or 3AC as it is known, including through court-supervised proceedings in the British Virgin Islands and New York.
Last week, Voyager temporarily suspended all withdrawals, deposits, and trading on its platform due to “current market conditions.” Ehrlich said at the time that Voyager was seeking more time to explore “strategic alternatives with the various parties involved.”
Several other companies, including Celsius, Babel Finance and Vauld, have taken similar steps. On Tuesday, Fuld received a takeover offer from rival Nexo, after suspending its services.
The cryptocurrency market is experiencing a severe liquidity crunch as platforms struggle to cope with an influx of withdrawals from clients amid a sharp drop in cryptocurrency prices.
The declines in cryptocurrency began with a broad decline in risky assets as the Federal Reserve embarked on tightening monetary policy, gaining pace after the collapse of Terra, the roughly $60 billion stablecoin project at its height.
Bitcoin, the world’s largest token, had its worst month ever in June, dropping 38%. Investors are preparing for a much longer slump in cryptocurrency known as “crypto winter.”
Voyager said the move would allow it to carry out a restructuring so that customers could be compensated.
If all goes according to plan, users will receive a combination of cryptocurrencies in their accounts, cashback proceeds from Three Arrows Capital, the company’s newly reorganized shares, and Voyager tokens.
Voyager said that customers with US dollar deposits will regain access to their funds once the settlement process is completed and fraud is prevented with Metropolitan Commercial Bank.
Alameda Research, the quantitative trading store of billionaire Sam Bankman-Fried, extended a Voyager credit line of $500 million in cash and cryptocurrency last month in a futile attempt to push the company through.
Alameda was listed as Voyager’s largest creditor in bankruptcy filing Tuesday, with an unsecured claim of $75 million.
Bankman-Fried, who also founded crypto exchange FTX, has become the lender of last resort to the turbulent industry. He recently agreed to a deal that gives FTX an option to buy crypto lender BlockFi for $240 million — a significant drop from the $3 billion it was recently appraised in private.
Some have likened Bankman Fried’s efforts to the role played by John Pierpont Morgan in saving Wall Street lenders from collapse after a series of bank outflows known as the Panic of 1907, which preceded the creation of the Federal Reserve.