Crypto broker Voyager Digital Ltd filed for Chapter 11 bankruptcy protection just weeks after receiving a rescue investment from Alameda Research billionaire Sam Bankman-Fried. Company officials cite market volatility and the collapse of the hedge fund to which the money was lent.
Voyager Digital Ltd, which received a line of credit from Alameda in mid-June for about $485 million, is on a growing list of victims of the market crash that saw cryptocurrency values shrink by $2 trillion. His application lists Alameda as the largest single lender with a $75 million unsecured loan.
“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,” said Voyager CEO Stephen Ehrlich in a tweet, referring to the crypto hedge fund that defaulted on a $675 million loan from Voyager Digital Ltd.
Last month, Voyager Digital Ltd issued a notice of default on the Three Arrows loan. Ehrlich tweeted that he was “actively” seeking to recover funds from the troubled crypto hedge fund, including through a court-ordered liquidation process in the British Virgin Islands.
Trading, deposits, withdrawals and loyalty rewards on Voyager Digital Ltd’s platform remain temporarily suspended, Ehrlich said. Customers with cryptocurrency in their accounts will receive proceeds from the restoration of Three Arrows, shares in the reorganized Voyager and Voyager tokens.
According to CoinGecko, the Voyager coin is down 98% from its peak.
Customers with USD deposits in their account(s) “will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank”, Ehrlich wrote in a tweet.
Voyager Digital Ltd offers crypto trading, betting – a way to earn rewards for owning certain cryptocurrencies – and yield products. Firms offering high-yield products, including Celsius Network, Babel Finance and Vauld, have suspended withdrawals since early June as liquidity has dried up. Singapore-based Vauld is in talks to acquire rival Nexo, the companies said Tuesday.
Shares of Voyager Digital Ltd fell 42% Monday, dropping its market value to C$66 million ($51 million). The company was valued at 2.7 billion Canadian dollars at the beginning of the year.
Tightening monetary policy from central banks seeking to stem the global inflation surge hit hard digital tokens, one of the most popular asset classes last year. The rout, which began in late 2021, gained momentum with the collapse of the TerraUSD stablecoin in May and then deteriorated further as bitcoin suffered its biggest-ever monthly drop in June.
With the rapid decline in leverage blowing up companies across the cryptosphere, Bankman-Fried has become a lender of last resort, lending to Voyager Digital Ltd and striking a capital infusion deal with BlockFi Inc. He also offers financial assistance to other affected companies, including crypto miners.