Customers entrusted with retirement funds, tuition funds and home down payments stored on the Voyager Digital platform are waiting to hear whether their assets will be returned at a bankruptcy auction scheduled for Tuesday.
The Federal Trade Commission alleges Voyager Digital and its CEO deceived customers by making false representations that their accounts were “FDIC insured”. A class action alleges the NBA’s Dallas Mavericks, football star Rob Gronkowski and NASCAR driver Landon Cassill helped promote the firm.
What happened to Voyager?
NASA’s Voyager 1 probe has provided us with valuable science data from beyond our solar system for decades, but has recently experienced issues related to its Flight Data System, or FDS. Engineers believe these issues may have to do with an upgrade being implemented on it in 2016.
FDS stands for Flight Data Recorder, an onboard computer which records and transmits information regarding all aspects of spacecraft systems including scientific instruments. Our team has been trying to diagnose this problem for months.
McCarter & English’s memo purported to assure Voyager that its USDC stablecoin deposits weren’t securities subject to regulatory oversight, citing an SEC official’s speech from 2018 as well as two no-action letters as support. But according to a lawsuit filed by customers against Voyager, its claims of exempt status from SEC oversight proved otherwise. Investors currently owed by Voyager stand to recover approximately 35% of their cryptocurrency deposits through Voyager bankruptcy liquidation plan which has already been approved and customers should see their funds returned soon enough.
Voyager’s bankruptcy
McDermott Will & Emery secured an agreement that ensures Voyager customers will get at least 35% of their deposited cryptocurrency, though the exact figure will depend on how bankruptcy judges value these cryptocurrencies.
Creditors of Voyager will get their funds back either as the cryptocurrency they deposited, or in cash. Voyager’s bankruptcy filings estimate it has approximately 100,000 creditors with assets and liabilities totalling between $1 billion and $10 billion.
However, some Voyager cryptocurrency may still be missing due to court-supervised liquidation proceedings; customer wallets could become intermingled with funds hypothecated and loaned out as hypotheses to hedge funds and others; as such if remaining assets sold may leave insufficient liquidity to pay customers; this issue could potentially be litigated further in bankruptcy court so it’s essential that users keep up-to-date on developments with Voyager.
Voyager’s restructuring plan
Voyager’s restructuring plan has received overwhelming support from both customers and creditors, which will ensure a smooth wind-down process. Voyager expects to return 98% of customer claims worth over $500 million while 83% of unsecured claims against Voyager’s TopCo and holding company have agreed to participate.
Voyager lured consumers to deposit money and cryptocurrency with its platform by advertising its USD Coin stablecoin, designed to track the value of the U.S. dollar. However, the Federal Trade Commission is now taking legal action against Voyager and former CEO Stephen Ehrlich for making misleading statements and engaging in unlawful practices.
At the bankruptcy hearing, one customer named Magnolia expressed her outrage at being defrauded by Voyager. She told the judge she has over $1 Million trapped on Voyager which she intended to use towards funding her children’s college tuition; however, Voyager wouldn’t allow her withdraw it and 24 years have gone by since she started saving.
Voyager’s lawsuits
Voyager Digital’s recent settlement agreement with FTX and Alameda Research will enable it to return $270 million of customer cash, an important step towards satisfying creditors.
Moskowitz and Boies assert that Voyager, FTX and Binance violated state law by marketing interest-bearing brokerage accounts as investments when they weren’t; their misrepresentations constitutes securities fraud.
Voyager Digital and its affiliated companies would not only be barred from handling consumers’ assets, but the proposed settlement also prohibits them from making false, fictitious, or fraudulent representations; from collecting nonpublic personal data about customers without consent; and disclosing financial data of consumers to third parties. Stephen Ehrlich and Francine Ehrlich were named relief defendants, while NBA endorsement of Voyager Digital as well as marketing ties between Voyager Digital and Mark Cuban of Dallas Mavericks form part of this actionable complaint.
