“We strongly believe in the future of the industry, but the prolonged volatility in the crypto markets and the default of Three Arrows Capital forces us to take this decisive step,” Voyager chief executive Stephen Ehrlich said Wednesday. in a tweet.
Three Arrows Capital goes into liquidation after crypto crash
Under Voyager’s proposed bankruptcy plan, customers who had cryptocurrencies in their accounts would receive a combination of crypto, the proceeds of funds recovered from Three Arrows, shares of the newly reorganized company, and Voyager tokens. , the company said. Customers with cash deposits in their accounts would have access to those funds once the company and Metropolitan Commercial Bank complete a reconciliation and fraud prevention process, Voyager said.
Voyager filed the reorganization petition in U.S. Bankruptcy Court for the Southern District of New York on Tuesday.
The filing shows Voyager has more than 100,000 creditors and lists assets and liabilities of between $1 billion and $10 billion.
The company said it has approximately $1.3 billion in crypto assets on its platform and claims over $110 million in cash and crypto assets held, which would help it maintain its daily operations during the bankruptcy process. An additional $350 million in cash held on behalf of clients is in an account with Metropolitan Commercial Bank, the company said in a statement.
Voyager’s financial difficulties highlight the high level of interconnectedness of the crypto industry. As crypto-related businesses borrow and invest in each other, the risks to investors are magnified as defaults can cascade and spread.
The bankruptcy marks another episode in crypto’s tough year. Although traditional financial markets have also suffered from a series of economic challenges – including soaring inflation, supply chain shocks from the pandemic and war in Ukraine, as well as aggressive monetary tightening from the Fed – cryptocurrencies have been particularly hard hit as investors flee to safer assets and prices falter.
This week, crypto lender Vauld halted all withdrawals in another instance of a broader industry meltdown, which included the crater of the TerraUSD stablecoin and a freeze on withdrawals by crypto bank Celsius.
Voyager first revealed its financial troubles in late June after reports surfaced of Three Arrows’ failure to meet demands from lenders to show additional funds when its crypto bets exploded. In a widely covered announcement, Voyager said it had issued a notice of default to Three Arrows and intended to collect the funds. The loan took the form of 15,250 bitcoins and $350 million of the stablecoin USDC, a digital token whose value is pegged to the dollar. The value of borrowed bitcoin at Wednesday’s prices is over $300 million.
Crypto lender Vauld offered a lifeline a day after suspending withdrawals
Shortly thereafter, however, a court in the British Virgin Islands ordered Three Arrows into liquidation following its failure to repay creditors as the value of bitcoin and other cryptocurrencies plummeted. And last week, global advisory firm Teneo set up a website for potential Three Arrows Capital creditors to submit claims and receive more insolvency information.
Voyager said it was pursuing all available remedies to recover the funds, including through court-supervised proceedings in the British Virgin Islands and New York.