Blockchain analysts are digging deep to uncover why Voyager crypto news collapsed and uncover what has become of customers’ funds.
McCarter & English, a New Jersey law firm, provided misleading legal opinions that contributed to Voyager Digital’s bankruptcy filing, according to investors in a lawsuit.
What is Voyager?
Voyager is one of two interstellar probes created by NASA, launched in 1977 and making their initial tour through our solar system’s outer planets since. Today they remain in interstellar space beyond our Sun’s radiative envelope and each carry the Golden Record containing messages from humanity to any alien civilization they might come across along their travels.
Both spacecrafts were also capable of taking photos of nearby planets and transmitting them back to Earth, helping scientists gain an insight into just how big our solar system truly was – as well as giving us what has become known as “The Pale Blue Dot”.
In 2022, sports stars including retired NFL player Rob Gronkowski and NBA player Victor Oladipo were sued for their roles in promoting Voyager Digital Holdings before it eventually declared bankruptcy and liquidated its assets through bankruptcy proceedings; this resulted in customers recovering around 35% of their recoveries as cryptocurrencies and cash respectively.
How did Voyager get into trouble?
One of the key questions in any bankruptcy is what happened to customer funds; with Voyager still under bankruptcy protection, its fate remains unclear but blockchain experts are searching for answers.
Attracting customers by promising double-digit annual yields on parking tokens on its platform, this company relied heavily on borrowing and volatile markets to fund growth – leaving itself open to collapse if prices were to plummet.
Investors were left reeling when the firm abruptly stopped trading and filed for bankruptcy protection last July, leaving many of them searching for answers and seeking relief.
Voyager’s former CEO Stephen Ehrlich is facing allegations he violated derivatives regulations and misled investors, as well as having provided misleading legal opinions to support Voyager’s native VGX token not being unregistered securities. If successful, this lawsuit could ban McCarter & English from handling consumer assets; additionally the firm is accused of lying to customers that their deposits were FDIC insured while Voyager’s bankruptcy plan states it will return customers’ USD deposits “after reconciliation and fraud prevention process,” though what will happen to crypto assets such as VGX in terms of withdrawal restrictions in US.
What is Voyager’s plan to repay customers?
Voyager promises that customers who hold unsupported cryptocurrencies or its proprietary VGX token will be reimbursed using USDC stablecoin as payment.
Exodus self-custody wallet will be used to return stranded crypto assets back to customers. According to Voyager, this will give users full control of their tokens. Voyager held an interactive town hall for these customers last week on YouTube – many attendees attended and asked questions at this live event.
One customer who testified during the bankruptcy hearing reported having more than seven figures worth of cryptocurrency stored with Voyager and that it had defrauded them. Furthermore, the Federal Trade Commission is conducting an investigation against Voyager and former CEO Stephen Ehrlich due to claims made about being FDIC insured and safe by Voyager.
How will Voyager repay customers?
Voyager’s bankruptcy trustee released a proposal this week that will enable customers to withdraw the money they initially deposited with them company, although details regarding how this will work remain vague due to customer crypto assets being mixed up together making it impossible to ascertain exactly which funds were put forward hypothecation loans or used by Voyager prior to its bankruptcy filing.
Voyager was severely compromised due to its large exposure to collapsed crypto hedge fund Three Arrows Capital (3AC). Voyager loaned the funds it received from customers back to 3AC as an act of lending them back out again.
Customers will be compensated through a combination of original cryptocurrency held, proceeds from 3AC recovery, and common shares in the newly formed company. Exodus wallet – created by the same team behind Voyager – provides them with access to any remaining crypto they own, marking an important step towards rebuilding trust within the industry after this turbulent episode.
