Voyager Customers With Frozen Savings on ‘Edge of Seat’ Ahead of Auction

Customers with their life savings frozen on the insolvent crypto platform Voyager Digital Ltd. are looking to a bankruptcy auction Tuesday for clues on whether or not they’ll finally get their assets back.

Voyager users have been unable to access their cryptocurrencies since July 1, when the meltdown in digital assets forced the company to suspend trading, deposits and withdrawals. Now, Voyager has attracted enough interest from potential buyers to necessitate an auction. And while a higher sale price is a potentially positive sign for customers, it’s still unclear how much money they’ll ultimately recover.

Earlier this year, Ed Pilotte decided to put about $40,000 of his “life savings” into Bitcoin, Luna and other digital coins through Voyager after his brother convinced him crypto was “the way of the future.”

Pilotte’s sister invested about $100,000 and his mother also used the platform. He decided to join them, encouraged by the returns of up to 9% on stablecoins that Voyager advertised. Then the app froze withdrawals.

“We're all on the edge of our seats at the moment waiting for the bids,” said 47-year-old Pilotte. “I didn't think it would be trapped the way it is.”

Voyager declined to comment.

Crypto Winter

collapsed earlier this year, many traders who had funneled money into digital coins watched their investments tumble. As a result of the rout, which saw Bitcoin prices slump nearly 75%, platforms like Voyager and Celsius Network Ltd. halted withdrawals and later filed for bankruptcy.

Read more: ‘I’m Done With Crypto’: Voyager Bankruptcy Rocks True Believers

Prior to its bankruptcy — which Voyager attributed to market volatility and the collapse of a hedge fund it had lent money to — the platform was viewed by the retail investor community as a relatively safe option in the wild world of crypto trading. It allowed users to buy and store dozens of cryptocurrencies online without having to deal with complicated keys or wallets. 

The company said at a court hearing on Aug. 24 that about $219 million, or 80%, of customer cash on the platform has been returned since the start of the bankruptcy. However, it’s less clear what will happen to users’ crypto and stablecoins. According to the bankruptcy plan, customers shouldn’t expect to recoup everything.

“There will likely be some sort of recovery, but it’s very much up in the air,” said Stephen Rutenberg, shareholder and co-chair of the fintech practice at Polsinelli LLP. “It will definitely take months.”

‘Trapped’

Customers who spoke to Bloomberg News and in bankruptcy court hearings have expressed shock and anger over the way the company handled their funds.

For Voyager users like Gary Piano in Los Angeles, the uncertainty has meant putting major life decisions on hold.

The 64-year-old invested about $40,000 in several coins including Bitcoin and Ethereum. He was attracted by advertisements saying Voyager was insured by the Federal Deposit Insurance Corp.

Voyager claimed in its marketing materials that cash deposits were FDIC-insured, leading to confusion among users, some of whom assumed that crypto deposits were also insured. In fact, while the platform did partner with FDIC-insured Metropolitan Commercial Bank, none of Voyager’s customers were protected

The drop in crypto prices hit Piano hard, wiping away about $25,000. Then he tried to withdraw the remaining money to use as a down payment on a home, but found his account locked. He was forced to back out of the home purchase and has put his retirement plans on hold indefinitely. 

“I just can’t make any major financial moves right now,” Piano said in an interview. “It’s changed my life. There’s a lot of anxiety over this — I have a hard time concentrating and I’ve lost my appetite.”

Voyager and Celsius locked customer accounts to protect against the equivalent of a bank run, where those quickest to yank their deposits would be made whole but others would be left with nothing.

The exact number of individuals like Pilotte with their savings tied up in Voyager is difficult to determine. The platform had about 3.5 million users as of March 31, up 9% from the end of 2021, and 1.19 million funded accounts.

Pleading Their Case 

During a bankruptcy hearing in early August, Lisa Dagnoli described herself as one of the “largest investors” in the Voyager case. She estimated that she lost $1 million on the platform, money she had made over 24 years in her family business, which she sold in 2020, according to court documents.

“I had $350,000 that was for my kids’ college on their USD Coin that they touted was FDIC insured, and I read up on it,” Dagnoli told the judge. 

Dagnoli said she was attracted to Voyager because it pitched itself as a legitimate, insured business that had the backing of big names like billionaire businessman Mark Cuban and Tampa Bay Buccaneers tight end Rob Gronkowski

She was one of many. During hearings and through letters sent to the judge presiding over the case, dozens ofcustomers have said they were lured in by deceptive advertisements that convinced them the company was a safe place to put their money.

Aristea Theodoropoulos, another Voyager customer, said she deposited her “entire life savings” into the USDC stablecoin through Voyager. In a letter to the judge, she pointed to videos and transcripts of Chief Executive Officer Stephen Ehrlich assuring customers their money was safe.

“I would have never in a million years taken my hard-earned money and put it into an asset that I believed I was not the custodian of,” Theodoropoulos said. “I am not a gambler.”

— With assistance by Yueqi Yang, Jeremy Hill, and Chris Dolmetsch