Days after suspending transactions, deposits and withdrawals on its platform, cryptocurrency lending platform Voyager Digital (TSX:VOYG) filed for bankruptcy in the Southern District of New York late Tuesday. The high-profile crypto broker cited market volatility and the surprise collapse of Three Arrows Capital (3AC) as reasons to go bankrupt. The shares and token value of Voyager fell on the news. The stock dipped to C$0.34 (US$0.27 on the OTC market) before trading was halted on Wednesday morning.
What Happened
According to the petition filed by Voyager, the company has more than $110 million of cash and cryptocurrency assets on hand. This will provide liquidity to support day-to-day operations during the process of Chapter 11. Voyager also has more than $350 million in cash in a customer benefits account at Metropolitan Commercial Bank.
Voyager has approximately $1.3 billion in cryptocurrency assets on its platform. The filing shows Voyager has more than 100,000 creditors and lists assets and liabilities of between $1 billion and $10 billion.
Last month, Voyager issued a notice of default to Three Arrows Capital for failing to make required payments on a loan worth over $650 million.
The crypto-focused hedge fund filed for Chapter 15 bankruptcy on July 1 following a court order by the British Virgin Islands to liquidate, leaving Voyager to scramble to collect what is owed to it. A3C managed around $10 billion in assets.
“The prolonged volatility and contagion in the crypto markets over the past few months, and the default of 3AC on a loan from the Company’s subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now,” Stephen Ehrlich, CEO of Voyager, said in a statement.
“The chapter 11 process provides an efficient and equitable mechanism to maximize recovery”, he added.
Three Arrows Capital (3AC) owed many companies large sums of money. Crypto lender BlockFi, which also had exposure to 3AC, struggled to remain solvent after the hedge fund collapsed and agreed to be acquired by the US arm of FTX for up to $240 million last week.
According to Voyager’s proposed reorganization, customers with cryptocurrency in their account will receive a combination of those digital assets, the proceeds of the 3AC recovery, common stock in the newly reorganized company, and Voyager tokens.
The plan also contemplates the ability for customers to select the proportion of common stock and crypto they will receive, subject to certain maximum thresholds.
“Voyager is actively pursuing all available remedies for recovery from 3AC, including through the court-supervised processes in the British Virgin Islands and New York,” Voyager said in a press release.
Ehrlich said in a tweet that during the reorganization, the company will maintain its operations and that they intend to maintain certain customer programs without interruption. However, he added that exchanges, deposits, withdrawals and loyalty rewards on the Voyager platform remain temporarily suspended.
Voyager Faces Delisting from the TSX
Shares of crypto broker Voyager Digital have been suspended from trading on the Toronto Stock Exchange as the exchange begins an expedited review to determine whether the stock continues to meet its listing requirements. Shares were also halted in over-the-counter markets in the United States.
The Investment Industry Regulatory Organization of Canada announced Wednesday that trading in shares of Voyager Digital on the TSX had halted at 8 a.m. ET. The Toronto Stock Exchange later announced that it had begun an expedited delisting review. The shares are also halted in the United States, where they trade over-the-counter under the symbol VYGVF.
Like fellow lender Celsius Network, Voyager suffered heavy losses as crypto markets slowed in recent weeks, culminating in suspended transactions, deposits and withdrawals earlier this month.
Featured Image: Megapixl @Rawpixelimages
