Voyager Digital, the Canadian crypto brokerage, has suspended all deposits, withdrawals, trading, and loyalty rewards by its customers.
The move comes after the brokerage delivered a notice of default to the soon to be liquidated crypto hedge fund Three Arrows Capital, after Three Arrows failed to repay $644 million in borrowed Bitcoin and USDC tokens.
In a release, Voyager CEO Stephen Ehrlich said, “This was a tremendously difficult decision, but we believe it is the right one given current market conditions.” He went on to couch the pause in activity as a measure taken to facilitate pursuing the funds that Three Arrows owes.
The suspension of services also extends to customers’ Voyager debit cards. One issue cited by analysts is that in addition to the $644 million loaned to Three Arrows, Voyager has another outstanding $480 million of user’s crypto assets which it had loaned out to other crypto operations hoping to make interest payments for their customers.
Voyager has assembled a team to help them navigate this period, including Moelis & Company and The Consello Group as financial advisors and Kirkland & Ellis LLP as a legal advisors.
Voyager shares fell 30% on Friday, though Canadian equity markets were closed. Voyager shares are down 97% this year.
Voyager acquired a revolving line of credit from Alameda Research earlier this month which guarantees them access to $200 million in cash/USDC and 15,000 Bitcoin, for a total of $439 million based on Bitcoin’s current pricing. Voyager emphasizes that although they have already accessed $75 million of this credit line, the default notice to Three Arrows and the current pause do not affect their terms with Alameda.
Voyager is not the only entity lining up among the debtors who loaned money to Three Arrows. BlockFi which was just reportedly sold for pennies on the dollar, lost $80 million in deals with Three Arrows.
And Genesis Trading is lining up behind them. The major crypto broker is also seeking to mitigate losses in the “hundreds of millions” it has suffered in its dealing with Three Arrows, according to its sister company, CoinDesk.
Doubtless there will be more as the contagion spreads.
