- Crypto broker Voyager Digital has officially filed for Chapter 11 bankruptcy, which involves a reorganization of the debtor’s debts, assets, and business affairs.
- Voyager is one of the companies that have been affected by the fall of Three Arrows Capital due to the crypto ecosystem.
- Voyager seeks to return its clients their funds in a combination of cryptocurrencies, proceeds from funds recovered from 3AC, shares in the newly reorganized company, and Voyager tokens.
Voyager Digital, a cryptocurrency broker, filed for bankruptcy due to its exposure to Three Arrows Capital and with it, becoming the latest crypto firm to go down as 3AC, one of Voyager’s clients, defaulted on a loan worth over $670 million US dollars.
it all started last week when Voyager Digital announced the suspension of withdrawals and transactions on the platform, with the aim of seek the recovery of 3AC and, in the meantime, Voyager planned to continue operating normally.
In a press release published on Friday, July 1, Stephen Ehrlich, executive director of Voyager, assured that “It was a tremendously difficult decision, but we believe it is the right one given the current market conditions.”.
However, a few days after 3AC files for bankruptcy, Voyager has filed for Chapter 11. That is to sayVoyager commenced bankruptcy proceedings in the United States Bankruptcy Court.
What will happen now?
For those who don’t know, Chapter 11 is a form of bankruptcy that involves a reorganization of the debtor’s debts, assets, and business affairs. In fact, it is often considered one of the most complex forms of bankruptcy proceedings.
In this way, when a company files for Chapter 11, it is choosing to propose a reorganization plan where the best interest is that of the creditors. For example, at the time, General Motors also accepted this chapter and more recently the brand focused on beauty, Revlon, has done so.
Taking this into account, Ehrlich, CEO of Voyager, argues in the Press release What do you think:
“Firmly on the future of the industry, but prolonged volatility in the crypto markets and the default of Three Arrows Capital force us to take this decisive action” and added that “The process of chapter 11 provides an efficient and equitable mechanism to maximize recovery”.
In the statement, the company reported having approximately $1.3 billion in cryptocurrency on its platform along with more than $350 million in cash held on behalf of clients of the Metropolitan Commercial Bank of New York. Apparently, these funds will help you maintain day-to-day operations during the bankruptcy process.
Likewise, he estimated having more than 100,000 creditors and between $1 billion and $10 billion in assets, with the same range for the company’s liabilities.
Proposed bankruptcy plan
According to the press release, the plan proposed by Voyager, which remains subject to change given the discussions and will also require the approval of the Court, proposes that customers who had cryptocurrencies in their accounts will receive a combination of assets.
Yes, you read it right. The plan seeks to return customers their funds in a combination of cryptocurrencies, proceeds from funds recovered from 3AC, shares in the newly reorganized company, and Voyager tokens. Of course, this will be the case as long as everything goes according to plan.
Meanwhile, those customers with cash deposits in their funds will receive access to them once the company and Metropolitan Commercial Bank complete a reconciliation and fraud prevention process.
“This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers.” Ehrlich assured.
They fall like dominoes
The word ‘bankruptcy’ has resonated a lot during the last few days in the crypto community. Why? Well, because of the high level of interconnection that currently exists in the cryptocurrency industry.
basicallye companies in the sector have borrowed and invested from each other and consequently any break in the system causes the failure to spread rapidly.
It all started with the collapse of TerraUST (UST) and LUNA and, with it, the massive removal of money from billions of investors. And before long, Celsius Network abruptly halted trading and withdrawals, exposing a liquidity crisis at other high-profile firms, including Three Arrows Capital, BlockFi, and Vauld.
The question is: What will be the next crypto firm to fall? Certainly Bankman-Fried, founder of the crypto exchange FTX, has become a savior of many crypto firms, but how much more can he save?
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