Representations of cryptocurrencies and the Voyager Digital logo are seen in this illustration taken July 7, 2022. REUTERS/Dado Ruvic/Illustrations

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  • Voyager tried to reassure customers “all is not lost”
  • Angry customers threatened company executives after their accounts were frozen
  • Voyager said customers may not fully recover their crypto assets

(Reuters) – Bankrupt crypto lender Voyager Digital described a rocky relationship with its customers at an initial bankruptcy hearing on Friday, saying it received threats after it froze its customers’ crypto accounts.

At the company’s first bankruptcy hearing before U.S. Bankruptcy Judge Michael Wiles in Manhattan, Voyager attorney Christopher Marcus of Kirkland & Ellis said the company proposed a bankruptcy restructuring plan as soon as she could in order to assure clients that they had not “lost everything”. after the company froze their accounts.

Voyager filed for bankruptcy protection in Manhattan on Tuesday, blaming a recent crash in crypto markets that caused it to freeze customer withdrawals. The company said it had 3.5 million active users and over $5.9 billion in cryptocurrency assets at the time of its filing.

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The recent crash led to another crypto lender, Three Arrows Capital (3AC), filing for bankruptcy in the British Virgin Islands. Two others, Celsius Network and Vauld, blocked clients from withdrawing crypto assets.

Voyager’s relative silence ahead of its bankruptcy filing has caused some customers’ anger to escalate into personal threats against company management and their families, Marcus said.

“We’re focused on the way forward,” Marcus said. “It’s not right to think that there is no hope.”

The bankruptcy plan, filed Wednesday, outlines Voyager’s efforts to find an outside buyer or to partially reimburse its customers. According to the plan, if no buyer emerges, Voyager would give customers all existing Voyager tokens, 100% of the company’s stock, any proceeds from a $650 million dispute with 3AC, and a to-be-determined partial refund of the specific cryptocurrency. held in their accounts.

While Voyager tried to reassure customers, it also told Wiles that customers did not own the specific crypto assets in their accounts. Voyager considers these assets to be company property, claiming that its customers have unsecured claims for the value of these assets.

Voyager made a distinction between crypto assets and the portion of client accounts held in cash, which it did not claim.

The customers’ cash accounts were held in a $350 million mixed account with the Metropolitan Commercial Bank, and Voyager will not interfere with the cash account unless it is concerned about fraudulent customer withdrawals, said said Josh Sussberg of Kirkland.

Wiles said the case presented several new legal issues, including Voyager’s position that it owned the crypto assets. The judge questioned whether Voyager had even filed the right kind of bankruptcy case, suggesting it met the criteria for liquidation as a broker with protected client accounts.

Sussberg said a traditional Chapter 11 restructuring would be better for clients. A brokerage liquidation would completely halt Voyager’s operations and lead to numerous costly litigation that would benefit no one, Sussberg said.

The case is Voyager Digital Holdings Inc, US Bankruptcy Court for the Southern District of New York, No. 22-10943,

For Traveling: Josh Sussberg, Christopher Marcus and Christine Okike of Kirkland & Ellis

Read more:

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