Voyager files for Chapter 11 Bankruptcy.
It started on July 1, Voyager suspended trading, deposits, withdrawals and loyalty rewards while seeking “strategic alternatives.” Trading remains suspended at this time. That’s when the spiral of the Voyager stock continued and people realized the situation was much worse then imagined. Voyager’s token VGX is down 92% so far this year, and has fallen 74% in the last month alone to $0.23. The company’s stock price is down 98% in the year-to-date, and last traded at $0.35 Canadian dollars ($0.27.)
Three business entities — Voyager Digital Holdings, Voyager Digital LLC and Voyager Digital Ltd. — are seeking bankruptcy protection. The three largely identical petitions were submitted via the Southern District of New York bankruptcy court. The firm is being represented by Kirkland and Ellis LLP, according to the filing documents, with Berkeley Research Group LLC as restructuring advisor.
US-based crypto platform Voyager Digital said it filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code as it seeks to implement its reorganization plan and "maximize value for all stakeholders." Chapter 11 generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.
Under Voyager's reorganization plan, customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the Three Arrows Capital (3AC) recovery, common shares in the newly reorganized company, and Voyager tokens. Meanwhile, 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, they added.
The company claims it has over USD 110m of cash and crypto on hand, in addition to more than USD 350m of cash held in the For Benefit of Customers account at Metropolitan Commercial Bank. Voyager also said it has approximately USD 1.3bn of cryptoassets on its platform, plus claims against 3AC of more than USD 650m. As reported, Voyager issued a notice of default to 3AC for failure to make the required payments on its previously disclosed loan of BTC 15,250 and USDC 350m. The estimated number of creditors exceeds 100,000. Quant crypto trading firm Alameda Research is listed as its biggest creditor, holding unsecured loans worth $75 million.
"While I strongly believe in this future, 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. The chapter 11 process provides an efficient and equitable mechanism to maximize recovery," Stephen Ehrlich, CEO of Voyager, was quoted as saying in the announcement.
Voyager’s woes are a symptom of a broader market downturn, which began in May with the collapse of the Terra blockchain — which wiped $40 billion in value off the market. The crypto market woes followed ever-worsening macroeconomic conditions and throughout June a slew of crypto companies faced liquidity issues, including crypto lending platforms Celsius and BlockFi.
A blog post from 2019 on Voyager's company website advertised that US dollar deposits are covered under the Federal Deposit Insurance Corporation (FDIC) and users are "guaranteed a full reimbursement" of up to $250,000. However, the small print of Voyager's terms points out that FDIC insurance only covers Voyager's bank – Metropolitan Commercial Bank — and "does not protect against the failure of Voyager or any Custodian." This aspect alone took many people by surprise, with the possibility of not being returned their funds even after bankruptcy is a very scary thought. Will be following very closely over next couple months.
