Cryptocurrency broker Voyager Digital applied for insolvency on Tuesday in the wake of the collapse of the significant crypto hedge fund Three Arrows Capital (3AC). Voyager’s Chapter 11 filing comes simply days after 3AC declared personal bankruptcy— and about a week after 3AC defaulted on a loan offered by Voyager.
In a news release, Voyager Digital mentions that it has about $1.3 billion worth of crypto possessions on the platform, $110 million in money and crypto possessions on hand, and the $350 million it keeps in an FBO (For-Benefit-Of) represent consumers. It likewise states 3AC still owes more than $650 million.
Voyager CEO Stephen Ehrlich blames the business’s monetary battles on “the extended volatility and contagion in the crypto markets” along with 3AC’s failure to repay its financial obligation. “The chapter 11 procedure offers an effective and fair system to take full advantage of healing,” Ehrlich included.
Companies like Voyager Digital utilize a Chapter 11 filing when they intend on restructuring their financial obligations while still staying functional. Voyager Digital described a proposed strategy in its news release, specifying it will provide clients “a mix” of the crypto kept in their accounts, the recuperated funds from 3AC, business shares, and Voyager tokens (which are presently worth about 21 cents each). The business states clients who presently have USD deposits in their accounts will just gain back gain access to “after reconciliation and scams avoidance procedure is finished with Metropolitan Commercial Bank.” This strategy still requires to be authorized by the court.
Voyager stopped briefly all trading, withdrawals, and deposits recently after revealing that 3AC stopped working to repay its loan. In June, Sam Bankman-Fried, the billionaire CEO of trading companies FTX and Alameda Research, extended a $500 million credit line to Voyager in an effort to assist it deal with the unsure market. Bankman-Fried’s Alameda Research likewise invested $75 million in Voyager in 2015, which the Chapter 11 filing notes as the business’s biggest unsecured claim.
The crypto crash is revealing simply how linked crypto companies truly are, with the short-term shutdown of crypto loan providers Celsius and Babel Finance preceding Voyager and 3AC’s insolvency filings. Previously today, crypto financing and trading start-up Vauld likewise suspended all deals, however it appears we’re yet to see how far the fallout will reach.