Voyager said it has approximately $1.3 billion in crypto on its platform and holds over $350 million in cash on behalf of clients at Metropolitan Commercial Bank in New York.
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Beleaguered crypto broker Voyager Digital has filed for Chapter 11 bankruptcy protection, becoming the latest victim of the chaos in the digital asset markets.
Voyager began bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of New York on Tuesday, according to a company filing. The document lists assets between $1 billion and $10 billion and liabilities in the same range.
In a statement, the company said it has about $1.3 billion in crypto on its platform and holds over $350 million in cash on behalf of clients at Metropolitan Commercial Bank in New York.
Voyager suffered huge losses from its exposure to crypto hedge fund Three Arrows Capital, which went bankrupt last week after defaulting on loans from a number of firms in the industry – including $650 million from Voyager.
“We strongly believe in the future of the industry, but continued volatility in the crypto markets and the failure of Three Arrows Capital require us to take this decisive action,” Voyager CEO Stephen Ehrlich said in a tweet early Wednesday.
Shares of the Toronto-listed firm have lost nearly 98% of their value since the start of 2022.
Voyager says it is still pursuing the recovery of funds from Three Arrows Capital, or 3AC as it is otherwise known, including through legal proceedings in the British Virgin Islands and New York.
Voyager last week paused all withdrawals, deposits and trading on its platform due to “current market conditions.” At the time, Ehrlich said Voyager was seeking additional time to explore “strategic alternatives with various stakeholders.”
Several other firms, including Celsius, Babel Finance and Vauld, have taken similar steps. On Tuesday, Vauld received a takeover bid from Nexo, a rival firm, after discontinuing its services.
The crypto market is grappling with a severe liquidity crisis as platforms struggle to accommodate a flood of customer withdrawals amid a sharp drop in digital currency prices.
The cryptocurrency declines began with a broad drop in risk assets as the Federal Reserve tightened monetary policy and picked up pace after the collapse of Terra, a so-called stablecoin venture that was worth about $60 billion at its peak.
Bitcoin, the world’s largest token, had its worst month ever in June, falling 38%. Investors are bracing for a much longer decline in digital currencies known as ‘crypto winter’.
Restructuring plan
Voyager said the move would allow it to implement a restructuring process so customers could be reinstated.
If all goes according to plan, users will receive a combination of crypto in their accounts, proceeds from the Three Arrows Capital refund, shares of the newly reorganized company, and Voyager tokens.
Customers with US dollar deposits will regain access to their funds once the reconciliation and fraud prevention process with Metropolitan Commercial Bank is complete, Voyager said.
Alameda Research, the quantum trading shop of billionaire Sam Bankman-Fried, extended Voyager a $500 million credit line in cash and cryptocurrency last month in a futile attempt to lure the company.
Alameda was listed as Voyager’s largest creditor on Tuesday in a second bankruptcy filing, with an unsecured claim of $75 million.
Bankman-Fried, who also founded the crypto exchange FTX, has become a lender of last resort for the troubled industry. It recently agreed to a deal giving FTX the option to buy crypto-lending company BlockFi for up to $240 million — a dramatic dip from the $3 billion it was last valued at privately.
Some have likened Bankman-Fried’s efforts to the role played by John Pierpont Morgan in saving Wall Street lenders from collapse after a series of bank runs known as the Panic of 1907, which preceded the creation of the Federal Reserve.
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