Jul 6 (Reuters) – US crypto lender Voyager Digital (VOYG.TO) On Wednesday, it said it has filed for bankruptcy, becoming another victim of a massive price drop that has rocked the cryptocurrency sector.
Cryptocurrency lenders like Voyager have thrived during the COVID-19 pandemic, attracting depositors with high interest rates and easy access to loans that traditional banks rarely offer. However, the recent downturn in the cryptocurrency markets – sparked by the collapse of two major coins in May – has hurt lenders.
New Jersey-based Celsius in June froze withdrawals and hired advisors over a potential bankruptcy filing. Voyager froze withdrawals this month, as did another bank, Singapore’s Fold. Read more
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Last week, Voyager said it issued a default notice to Singapore-based crypto hedge fund Three Arrows Capital (3AC) for failing to make payments on a crypto loan totaling more than $650 million. Read more
Later that week, 3AC filed for Chapter 15 bankruptcy, which allows foreign debtors to protect US assets, becoming one of the prominent investors affected by the drop in cryptocurrency prices. Reuters reported last week that 3AC is now in liquidation. Read more
“The prolonged volatility and contagion in the cryptocurrency markets over the past few months, and the default on three Capital shares seeking a loan from the company’s subsidiary, Voyager Digital, LLC, requires us to take deliberate and decisive action now,” Officer Stephen Ehrlich said in a statement.
Chapter 11
Photograph: Dadu Rovich/Reuters
In its Chapter 11 bankruptcy filing on Tuesday, Voyager — which is based in New Jersey but listed in Toronto — estimated it had more than 100,000 creditors and between $1 billion and $10 billion in assets and liabilities of the same value.
Voyager last month signed an agreement with trading company Alameda Ventures, founded by Sam Bankman-Fried, chief executive of major FTX exchange, for a revolving line of credit. A filing with the US Bankruptcy Court in the Southern District of New York showed that Alameda was Voyager’s single largest creditor, with $75 million in unsecured loans.
Alameda did not immediately respond to a request for comment.
Chapter 11 bankruptcy proceedings put a hold on all civil litigation matters and allow companies to prepare turnaround plans while business continues.
In a message to clients on Twitter, Ehrlich said the process will protect assets and “maximize value for all stakeholders, especially clients.”
Voyager said Wednesday that it has more than $110 million in cash and proprietary crypto assets on hand. Intends to pay employees in the usual manner and continue their basic benefits and certain customer programs without interruption.
Voyager has appointed Moelis & Company and The Consello Group as financial advisors, Kirkland & Ellis LLP as legal advisor and Berkeley Research Group LLC as restructuring advisor.
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Additional reporting by Shivam Patel in Bengaluru, Sinead Cruz and Tom Wilson in London; Additional reporting by Anne-Maria Shipu; Editing by Rashmi Aish, Bradley Perrett, Alexandra Hudson
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