Crypto-lender Voyager Digital became the latest victim of the sudden fall in crypto prices, as it filed for bankruptcy protection.
During the boom in crypto, lenders such a voyager became a phenomenon, promising to earn users big returns on their tokens in return for parking them with the lender, and offering easy access loans unlike any offered by banks. However the overall slump in crypto markets, as well as the recent collapse of two tokens in particular, Luna and Terra, caused shockwaves to ripple through the industry which tested the solvency of all they touched.
In June, Celsius Network announced it was freezing user accounts due to market conditions, offering no further information, as it hired advisers, possibly for a bankruptcy filing. This month Voyager followed suit, freezing user withdrawals, as did Singapore’s Vauld, another lender.
Voyager had issued a notice of default to failed crypto hedge fund Three Arrows Capital, for failing to make promised payments on a $650 million crypto loan. Three Arrows then filed for Chapter 11 Bankruptcy later in the week, shielding its US assets. It is now reportedly being liquidated.
In a statement, Voyager Chief Executive Officer Stephen Ehrlich said, “The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan from the company’s subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now.”
In the Chapter 11 filing, Voyager estimated it had somewhere between $1 billion and $10 billion in assets, the same amount of liabilities, and over 100,000 creditors. Voyager had negotiated a revolving line of credit with Alameda Ventures last month. Alameda is now its largest creditor, with $75 million in unsecured loans listed.
Chapter 11 protection is designed to stop all civil litigation against a company, allowing it to remain operational, and prepare turnaround plans.
Voyager Chief Executive Officer Stephen Ehrlich said in a statement, this process would, “maximize value for all stakeholders, especially customers.”
On Wednesday Voyager said it had over $110 million in cash and owned crypto assets on hand, and will pay employees as per usual, continue employee benefits, and maintain specific customer programs without disruption.
As of now, Moelis & Company and The Consello Group are employed by Voyager as financial advisers, Kirkland & Ellis LLP are their legal advisers, and Berkeley Research Group LLC is serving as restructuring adviser.
