Voyager Digital’s liquidation plan was approved by a US bankruptcy judge earlier this week, after filing for bankruptcy due to exposure arising from Three Arrows Capital (3AC)’s collapse last summer.
Customers should receive around 35% of their cryptocurrency deposits back, though this will depend on future litigation results.
Voyager Digital Updates Creditors
Voyager Digital, one of the few crypto lenders currently active, is working hard to reimburse its customers despite these turbulent times. On May 17th, its Official Committee of Unsecured Creditors reported that bankruptcy courts had granted approval for them to begin dispersing customer funds.
Creditors of Voyager may expect their initial cash and crypto distributions “within weeks,” the firm announced. To return customers’ funds in digital assets they held before it temporarily suspended withdrawals and filed for bankruptcy last summer; for deposits made into unsupported cryptocurrencies or with Voyager’s native token VGX (Voyager Generating Token Exchange Exchange eXchange token), Voyager will return it using USDC stablecoin.
However, this plan to repay creditors carries some inherent risks. One of Voyager Digital’s largest investors, Ullas Naik has already voiced doubts as to the feasibility of its proposed sale to FTX US; both firms share investors such as Sequoia Capital and Lightspeed Venture Partners among others as investors; in addition, FTX US is in talks with potential buyers as well.
Voyager Digital Files for Bankruptcy
Voyager Digital was forced to suspend trading, deposits and withdrawals after being hit hard by the recent crypto sell-off. Furthermore, its exposure to Terra blockchain ecosystem which collapsed last May had led to it losing billions in investor wealth.
This company has filed for bankruptcy with the US Bankruptcy Court for the Southern District of New York and lists assets between $1 billion and $10 billion and over 100,000 creditors.
Alameda Research Ventures, owned by Sam Bankman-Fried, the former founder of defunct crypto exchange FTX, owes money. Metropolitan Commercial Bank also holds some customer funds and all this could affect who and how many are compensated in this case. Furthermore, Metropolitan Commercial Bank hired Timothy Pohl – an expert on corporate finance law including valuation and restructuring law who will supervise financial operations within their bank to return value back to customers.
Voyager Digital Repays Customers with Stablecoin
At a five-hour bankruptcy hearing this week, customers of Voyager Digital shared their experience. At least one person identified only as Magnolia reported having over $1 Million stuck on the platform including funds she had saved up for her children’s college tuition costs.
On Friday, Voyager obtained approval from a court to begin repaying customers – they estimated they will recover 35% of their cryptocurrency – although customers remain dissatisfied with such low recovery rate.
Customers of Voyager will be paid back using its stablecoin, USDC. Paul Hage, bankruptcy plan administrator of Voyager’s firm, indicated that users would soon be able to update their Voyager app to display available withdrawal balances; distribution should begin between June 20 and July 5. Voyager was hit hard by market turmoil caused by Terra Luna’s collapse, debt to Three Arrows Capital (3AC), and defaulting on loans from New York investment bank Metropolitan Commercial Bank; these actions all contributed towards its downfall and bankruptcy proceedings being overseen by New York Supreme Court proceedings; bankruptcy proceedings being conducted under this court’s direction were launched by New York Supreme Court when Terra Luna collapsed alongside debt due to Three Arrows Capital (3AC), as well as defaulting loans from New York investment bank Metropolitan Commercial Bank which caused this crisis to begin between June 20 and July 5 when creditors demanded repayment on loans originally agreed upon between June 20 and July 5.
Voyager Digital Offers FDIC Insurance
As Voyager Digital embarks upon its bankruptcy proceedings, customers remain uncertain what will become of their funds. While the company had assured customers through marketing that their money was insured, that claim turned out to be false; billions in customer assets have been frozen since January and won’t be recovered until after this process concludes – at best creditors may only see pennies of returns at best.
Federal regulators issued Voyager Digital with a cease-and-desist letter this week, alleging it made “false and misleading statements” regarding FDIC insurance coverage for its customer funds through Metropolitan Commercial Bank partnership, when in reality FDIC only covers actual deposits with banks like Voyager Digital. As per this request from regulators, Voyager Digital must remove all references to federally insured status from its website, app and social media channels immediately.
