Voyager Digital Files For Chapter 11 Bankruptcy Amid Crypto Credit Crisis

Joining Three Arrows Capital, Voyager Digital becomes the second high-profile crypto firm to file for bankruptcy

Bishal Kumar Chanda3 min read
Voyager Digital Files For Chapter 11 Bankruptcy Amid Crypto Credit Crisis

Joining the Singapore-based Three Arrows Capital, Voyager Digital has become the second high-profile crypto firm to file for bankruptcy lately.

Voyager Digital - Latest Crypto Firm to File For Bankruptcy

Days after halting trading, withdrawals, and deposits, crypto broker Voyager is filing for Chapter 11 bankruptcy. According to a filing, the firm and its two affiliates, Voyager Digital LLC and Voyager Digital Holdings, took action in the Southern District Court of New York.

The Chapter 11 bankruptcy filing indicates that Voyager owes anywhere from $1 billion to $10 billion to over 100,000 creditors. But Voyager explained on Wednesday that the move is part of a "Plan of Reorganization." Moreover, it aims to enable clients to re-access their accounts so Voyager can "return value to customers."

Voyager files for bankruptcy

Voyager CEO Stephen Ehrlich proposed a plan where customers with crypto in their accounts will receive a combination of crypto and proceeds from 3AC recovery. In addition to that, they will also receive common shares in the newly reorganized company and Voyager tokens.

"We strongly believe in the future of the industry but the prolonged volatility in the crypto markets, and the default of Three Arrows Capital, require us to take this decisive action," Ehrlich tweeted.

He also added that "customers with USD deposits in their account(s) will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank."

In the same Twitter thread, Ehrlich said he felt Chapter 11 was the best option for Voyager clients. He explained that considering all factors, he was assured that the move would protect assets on the platform while Voyager continues operating.

According to Voyager, it will be filling "First Day" motions as part of the reorganization process, which will allow it to maintain operations.

Meanwhile, Voyager intends to pay its employees as usual while continuing "primary benefits and certain customer programs without disruption." However, the withdrawals, trading, and loyalty rewards will stay suspended.

What Happened With Voyager Digital?

Signs of Voyager experiencing headwinds came after the crypto broker signed a $500 million loan agreement with trading firm Alameda Research. Reportedly, Voyager would use the funds to cover losses from its exposure to crypto hedge fund 3AC.

A day later, Voyager lowered its daily withdrawal limit to $10,000. Further, on July 1, the platform announced suspending withdrawals, deposits, trading, and loyalty rewards distributions.

Previously, Voyager also issued a notice of default to 3AC for failing to make payments for its loan worth $646 million. However, 3AC is going through the Chapter 15 bankruptcy proceedings, meaning it could be difficult for Voyager to recover funds.

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