Crypto lending platform Voyager Digital filed for bankruptcy late Tuesday under Chapter 11 of the United States Bankruptcy Code.
Filing For Reorganization
Crypto companies continue to struggle with solvency as another major player files for bankruptcy. High-profile crypto broker platform Voyager Digital is the latest victim of the bear market, as it has filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the Southern District of New York. Chapter 11 will make way for reorganization and propose a payment plan for creditors over time.
Initial Plan Of Reorganization
The company has estimated that it has over $110 million of cash and crypto on hand and a further $350 million cash held in the For Benefit of Customers account at Metropolitan Commercial Bank. Furthermore, it has claimed that the cryptoassets held on the platform value close to $1.3 billion. However, a significant chunk of its assets is still stuck with Three Arrows Capital (3AC). As of now, the reorganization plan would involve taking over account access and focusing on returning value to customers. The initial plan is to provide proceeds for 3AC recovery, common shares in the newly reorganized company, and Voyager tokens to customers with crypto in their accounts. The customers can decide on the proportion of common equity and crypto they will receive. On the other hand, customers with USD in their accounts will only receive funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.
3AC’s Troubles Affecting Voyager
Crypto hedge fund 3AC was one of the worst-hit firms during the 2022 bear market. Less than a week ago, the firm had to finally be liquidated as it struggled to stay solvent after the Terra LUNA debacle. The firm has also defaulted on its loan from Voyager Digital, which had lent the distressed fund 15,250 BTC and another $350 million in USDC stablecoins. Voyager has already issued a notice of default to 3AC for payment failure of the total loan amount of approximately $650 million.
Voyager CEO Stephen Ehrlich spoke on the decision to reorganize,
"This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers…The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan from the Company's subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now."
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