TSX-listed crypto firm Voyager Digital warns of $655 million loan default, shares plunge 53 percent

Voyager Digital Ltd’s VOYG-T stock lost. TSX listed halved its value in a day after management warned of a possible default on a $655 million loan to a troubled hedge fund, as investors continue to fear financial contagion due to the recent collapse of the crypto sector.

Voyager, which went public in Canada in 2019, was historically known for its place of business that allows individual and institutional investors to buy and sell cryptocurrencies. However, the company has recently expanded its operations, and one of its new divisions provides loans to borrowing organizations. At the end of March, Voyager loaned $2 billion in crypto assets, according to its quarterly filings.

On Wednesday, Voyager revealed that it has lent $655 million to Three Arrows Capital, a hedge fund known for trading cryptocurrency, in the form of 15,250 bitcoin and $350 million worth of USDC, another cryptocurrency.

In a notice to investors, Voyager said it had originally requested that $25 million in USDC be repaid from Three Arrows by June 24, and that it has since requested that the entire balance of the USDC and bitcoin be repaid by June 27.

“None of those sums have been repaid, and failed before [Three Arrows] Paying the required amount by these specific dates would constitute an event of default,” the company wrote, adding that it was “unable to assess how much it would be able to recover at this point.”

Earlier this month, Three Arrows revealed that it has hired legal and financial advisors after it incurred huge losses during the recent crash of the crypto sector. The hedge fund, which was founded in 2012, invested about $200 million in cryptocurrency Luna, and Luna plummeted in value within weeks in early May. Most cryptocurrencies have also fallen this year, causing further losses.

Following the disclosure on Wednesday, Voyager shares were down 53 percent by closing time. The stock is down 95 percent since the start of the year, bringing the company’s market capitalization down to $148 million from about $3 billion in six months.

Cryptocurrency values ​​have been plummeting for months and the price of Bitcoin is down 70 percent from its November peak. Recently, however, there is a fear that the pain will be far-reaching as the cryptocurrency sector has begun to shift to a complete shadow banking system with loans and other products. In some cases, the collateral pledged against these loans came in the form of cryptocurrencies.

Complicating matters further, the growing shadow system has virtually no regulation and very little transparency, so it is now difficult to determine each lender’s exposures or how it all relates.

Last week, crypto lender Celsius Network Ltd froze all withdrawals and transfers among its 1.7 million customers, and has since revealed that it will “take time” to normalize its operations. Very little is known about the extent of her tragedies.

Voyager is now the second cryptocurrency company listed on TSX to suffer the collapse of Luna. In May, Mike Novogratz, CEO of Galaxy Digital Holdings Ltd., a leading Toronto-listed cryptocurrency company, issued a public apology for heavily promoting Luna, and Galaxy shares are down 86 percent from a record high. In November. At its peak, the company was valued at $14 billion.

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