Financial records show that Stephen Ehrlich, CEO of bankrupt crypto exchange Voyager Digital, made millions of dollars selling Voyager shares in February and March 2021 when the shares were near their peak, nineteen months before the crypto lender declared bankruptcy in July 2022.
Ehrlich’s gains were driven by a massive increase in Voyager’s share price, which jumped from seven cents a share in October 2020 to $26 a share by March 2021. In the same period, Bitcoin rose 455% and Ether rose 688%.
Like the similarly beleaguered Celsius, the company promised huge returns on assets entrusted to its users. But as cryptocurrency prices plummeted earlier this year, Voyager’s business proved unsustainable, leading the company to freeze assets deposited by retail investors in June, and then declare bankruptcy in July. Voyager was holding $1.3 billion in customer crypto assets spread over 3.5 million active users, according to a bankruptcy filing.
Complex and opaque corporate structure — including a reverse takeover of an expired Canadian mining company, acquisition and disposal of Delaware LLCs, and consulting fees paid to LLCs — makes it difficult to determine how much of the Voyager co-founder took home .
What is clear, based on internal corporate disclosures and Voyager filings, is that Ehrlich has made more than $30 million worth of Voyager shares as shares of the crypto lender approached all-time highs.
Ehrlich and his Delaware LLC sold approximately 1.9 million shares from February 9, 2021 to March 31, 2021.And the in 11 separate sales totaling $31 million, according to data from the Canadian Securities Administration.
Ehrlich’s three largest transactions – totaling 1.4 million shares worth approximately $19 million – were linked to a secondary offering of $50,000,000 by Stifel Nicholas in February 2021.
Voyager shares peaked at $29.86 a week after Ehrlich’s final sale on April 5, 2021. Three weeks later, VOYG shares have lost 41% of their value. By November 2021 – as the cryptocurrency market in general reached its peak – Voyager was down 69% from its peak.
Many publicly traded companies have pre-set trading restrictions or plans in place regarding when senior executives and insiders can execute sales. In the United States, 10b5-1 plans prevent insiders from using “material non-public information” to gain an advantage or profit. In Canada, these plans are known as Automatic Securities Disposal Plans, or ADSPs.
On December 31, 2021, months after these internal sales, Voyager announced the adoption of ADSPs for Ehrlich and another CEO, Gerard Hanchy. Less than a month later, on January 20, 2022, Ehrlich announced the cancellation of ADSPs before any deals under them could be completed.
“Despite having a much higher floor than the current stock price, I felt it was in the best interests of investors to withdraw the plan,” Ehrlich said in a press release. “Based on our key financial metrics, including revenue for the quarter ending December 31, 2021 as disclosed in our January 5, 2022 press release, I believe Voyager is undervalued.”
Ehrlich did not respond to multiple requests for comment.
Voyager ran into trouble earlier this year as crypto prices fell more than 70% from their peak last fall. In particular, the collapse of a stablecoin, Terra, which was supposed to be pegged to the US dollar, caused shock waves in the industry.
Voyager disclosed to creditors on June 27 that hedge fund Three Arrows Capital had defaulted on a $650 million loan that Voyager extended using client assets. At the time, Voyager insisted that it would continue to honor customer withdrawals and refunds.
Five days later, Erlich froze customer withdrawals, leaving millions of users without access to their crypto assets. “This was a very difficult decision, but we believe it was the right decision given the current market conditions,” Ehrlich said in a statement.
On July 6, the crypto lender filed for Chapter 11 bankruptcy protection, engaging white shoe firm Kirkland, Ellis and investment bank Moelis & Company to advise them through the process. Many petitioners have moved to restore access to their properties since the process began.
The FDIC has since ordered Voyager to stop calling its FDIC-insured products, calling the allegations “false and misleading.”