Voyager Digital, a U.S. crypto lender listed on the Toronto Stock Exchange (VOYG. TO), announced on Wednesday that it has filed for bankruptcy due to the drastic decrease in cryptocurrency values which has caused upheaval in the industry.
Crypto lenders such as Voyager flourished during the COVID-19 pandemic due to their attractive interest rates and easy access to loans not typically offered by standard banks. Nevertheless, the recent sharp declines in crypto markets – which were brought on by the drop of two primary tokens in May – have had a detrimental effect on these lenders.
In June, Celsius, a company based in New Jersey, halted customer withdrawals and hired advisors to explore the possibility of bankruptcy. In addition, Voyager and Vauld from Singapore both froze their withdrawal services this month.
Voyager recently announced that it had sent a notice of default to the Singapore-based crypto hedge fund Three Arrows Capital (3AC) due to their failure to fulfill payments for a crypto loan amounting to more than $650 million.
Three days later, 3AC applied for Chapter 15 bankruptcy protection in order to safeguard its US assets from any foreign debtors. This made them one of the most prominent investors who have been affected by the decrease in cryptocurrency values.
“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.”
– Voyager Chief Executive Officer Stephen Ehrlich
On Tuesday, Voyager – based in New Jersey but registered in Toronto – submitted a Chapter 11 bankruptcy filing, listing more than 100,000 creditors and assets and liabilities between $1 billion and $10 billion.
Prior to this, the firm had made an agreement with trading firm Alameda Ventures (established by Sam Bankman-Fried, CEO of FTX) for a revolving line of credit. According to documents submitted to the U.S. Bankruptcy Court Southern District of New York, Alameda holds Voyager’s largest unsecured loan at $75 million.
Alameda did not reply right away to a request for comment.
In a tweet, Ehrlich explained that the Chapter 11 bankruptcy process would safeguard resources and “maximize worth for everyone involved, especially customers”.
Voyager announced on Wednesday that it had over $110 million in cash and digital assets. It is planning to pay employees as usual and keep their primary benefits, as well as certain customer services intact.
To assist with the restructuring efforts, Voyager has employed Moelis & Company and The Consello Group as financial consultants, Kirkland & Ellis LLP for legal counsel, and Berkeley Research Group LLC for restructuring advice.
