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Suvashree Ghosh
The cryptocurrency sector’s troubles deepened Wednesday as broker Voyager Digital Ltd. filed for Chapter 11 bankruptcy protection.
The firm and two affiliates, Voyager Digital LLCVoyager Digital Holdings, took the step in the Southern District of New York, a filing showed.
“We strongly believe in the future of the industry but the prolonged volatility in the crypto markets, and the default of Three Arrows Capital, require us to take this decisive action,” chief executive officer Stephen Ehrlich said on Twitter.
This well-established legal process whereby companies reorganize their financial obligations to emerge as stronger organizations, provides an efficient & equitable mechanism to maximize recovery. Our goal is to come out a stronger organization.
— Stephen Ehrlich (@Ehrls15) July 6, 2022
Voyager Digital late last week temporarily suspended trading, deposits and withdrawal amid challenging market conditions. About $2 trillion in market value has been wiped from the crypto sector since a peak last year, amid a global wave of monetary tightening that drained liquidity and blew up leveraged bets.
Trading, deposits, withdrawals and loyalty rewards on the Voyager platform remain temporarily suspended, Ehrlich added.
Sam Bankman-Fried, co-founder of crypto exchange FTX US, had acted as a sort of lender of last resort for Voyager by providing credit lines via Alameda Research. Voyager’s filing lists $75 million of unsecured loans from Alameda, making the firm the biggest single creditor.
Three Arrows Fallout
New-York based Voyager is the latest in the digital-asset sector to hit trouble. Hedge fund Three Arrows Capital, to which Voyager had lent hundreds of millions of dollars, was ordered into liquidation last month after failing to repay creditors.
Voyager offered crypto trading, staking -- a way of earning rewards for holding certain cryptocurrencies -- and yield products. Firms offering high-yield products including Celsius Network, Babel Finance and Vauld have suspended withdrawals as liquidity dried up.
Last month, Voyager issued a notice of default to Three Arrows Capital on a loan worth roughly $675 million. It’s actively pursuing recovery from the troubled crypto hedge fund, including through the court-ordered liquidation process in the British Virgin Islands.
Crypto markets weakened slightly after the latest filing. Bitcoin slipped about 2.4% to $19,950 as of 1:31 p.m. in Singapore.
