Voyager Crypto is the latest crypto firm to halt withdrawals, leaving investors wondering what happened to their funds. Experts on blockchain forensics are now piecemealing together facts.
Voyager announced on 6 July in a press release that they plan to return part of customers’ cryptocurrency holdings through proceeds from 3AC recovery, common shares in a newly organized company and VGX tokens.
1. Bankruptcy
As crypto prices surged last year, Voyager sought the help of prominent sports figures like Dallas Mavericks owner Mark Cuban and Tampa Bay Buccaneers tight end Rob Gronkowski to promote its platform. Unfortunately, when prices crashed and started dropping again, Voyager collapsed as it filed Chapter 11 bankruptcy protection on July 6, 2022, citing debts to customers and creditors as reasons.
Voyager’s plan to return customers’ cash deposits held with Metropolitan Commercial Bank (MCB) has been approved by a bankruptcy court and they will now receive their money in USDC stablecoin; other customers will be reimbursed through cryptocurrency held on Voyager platform as well as proceeds from 3AC recovery efforts and new common shares from its reorganized company.
In a live town hall event, the Unsecured Creditors Committee informed customers they will soon send proof-of-claim forms letting them know what their crypto or cash claims are worth and when initial distributions may start. They hope initial distributions can begin as early as November.
2. Withdrawals
Voyager Digital’s bankruptcy left many customers unable to access funds that they invested in USD Coin, Bitcoin or memecoin Shiba Inu (SHIB).
Voyager Financial Group temporarily suspended trading, deposits and withdrawals on July 1 after Three Arrows Capital defaulted on $650 million debt. Voyager has acknowledged that they may not be able to return all the crypto to customers as this depends on whether 3AC can recover assets.
Customers of Voyager have expressed a sense of deception against them by depositing tokens into its platform in trust, only to learn later they were unsecure loans prone to market fluctuations and they didn’t control their keys as usual – an obvious security risk and source of crypto thefts. Customers thus want their money back but are frustrated that it cannot be obtained easily.
3. Exodus Self-Custody Wallet
Exodus is a software wallet designed to allow users to safely store their cryptocurrency assets. It includes mobile and desktop applications for PCs running Windows or Linux as well as iOS or Mac OS devices; in addition, hardware wallet support provides enhanced security.
Like any non-custodial wallet, cryptocurrency wallets are vulnerable to hacking; therefore, it is wise to use them with care and preferably as part of a hardware wallet solution to increase protection even further.
As soon as you install Exodus, it will generate a 12-word recovery phrase for you to write down and store safely – never share this passphrase with anyone! Furthermore, avoid providing private keys or recovery phrases to people claiming to be from Exodus since these are likely scammers looking for private data or recovery phrases from you.
4. Legality
The NBA and McCarter & English were responsible for billions in investor losses, according to the lawsuit, due to their promotion of Voyager to attract investors, partners, and customers. Furthermore, according to the complaint filed with the courthouse by investors against them, McCarter & English issued an opinion which mislead investors by downplaying risks associated with investing in Voyager platform and misled potential investors by asserting VGX token was not security token thereby misleading and underplaying risks involved with investing therein.
CFTC alleges that Stephen Ehrlich, Voyager’s CEO, failed to do his due diligence on Three Arrows Capital (3AC) before lending them hundreds of millions in digital assets and cash loans that later imploded; therefore the agency seeks to recover customer losses as soon as possible.
One customer revealed at the bankruptcy hearing that they had “well over seven figures” invested on the app; this stranding is an issue for all cryptocurrency investors as ownership can only be claimed via possession of private keys. This case sends compliance messages throughout the industry and beyond.
