Voyager Seeks Bankruptcy as Crypto Mogul’s Lifeline Fails

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(Bloomberg) -- Crypto broker Voyager Digital Ltd. filed for Chapter 11 bankruptcy extortion conscionable weeks aft getting a lifeline from billionaire Sam Bankman-Fried’s Alameda Research, citing marketplace volatility and the illness of a hedge money it had lent wealth to.

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The steadfast and 2 affiliates, Voyager Digital LLC and Voyager Digital Holdings, took the measurement successful the Southern District of New York, a filing showed connected Wednesday.

Voyager, which secured a recognition enactment worthy astir $485 cardinal from Alameda successful mid-June, is among a increasing database of casualties of a marketplace illness that’s seen astir $2 trillion wiped disconnected the worth of cryptocurrencies. Its filing listed Alameda arsenic the biggest azygous creditor, with a $75 cardinal unsecured loan.

“We powerfully judge successful the aboriginal of the manufacture but the prolonged volatility successful the crypto markets, and the default of Three Arrows Capital, necessitate america to instrumentality this decisive action,” Chief Executive Officer Stephen Ehrlich said connected Twitter, referring to the crypto hedge money that defaulted connected a $675 cardinal indebtedness from Voyager.

Voyager listed assets and liabilities of betwixt $1 cardinal and $10 billion, respectively, successful its Chapter 11 filing.

The institution has astir $1.3 cardinal of crypto assets connected its level and $350 cardinal successful a alleged For Benefit of Customers relationship astatine Metropolitan Commercial Bank, successful summation to its claims against Three Arrows, according to a abstracted statement. It besides has much than $110 cardinal successful currency and “owned crypto assets” connected hand.

Last month, Voyager issued a announcement of default to Three Arrows connected the loan. It is “actively” pursuing betterment from the hedge fund, including done the court-ordered liquidation process successful the British Virgin Islands, Ehrlich tweeted.

Read more: Crypto Hedge Fund Three Arrows Set for Liquidation

Besides trading and lending, Voyager besides offers staking -- a mode of earning rewards for holding definite cryptocurrencies -- and output products. Firms successful that abstraction including Celsius Network, Babel Finance and Vauld person suspended withdrawals since aboriginal June arsenic liquidity dried up. Singapore-based Vauld is successful discussions to beryllium acquired by rival Nexo, the companies said connected Tuesday.

“Voyager’s bankruptcy filing fundamentally confirms that the crypto lender did usage its customers’ funds arsenic a root of dollar liquidity and lent them to entities similar 3AC arsenic a leveraged commercialized of sorts portion it would perpetually get wealth itself to conscionable existent withdrawal requests,” said Mikkel Morch, enforcement manager astatine crypto hedge money ARK36, utilizing the acronym for Three Arrows Capital.

Stock Implosion

Trading, deposits, withdrawals and loyalty rewards connected the Voyager level stay temporarily suspended, Ehrlich said. Clients who person crypto successful their accounts volition person a premix of their integer assets, proceeds from the Three Arrows recovery, shares successful a reorganized Voyager and Voyager tokens.

The Voyager coin has tumbled 98% from its peak, according to CoinGecko.

Customers with US dollars successful their accounts “will person entree to those funds aft a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank,” Ehrlich said successful the tweet.

Shares successful Voyager plunged 42% connected Monday, slashing its marketplace worth to C$66 cardinal ($51 million). The institution was valued astatine C$2.7 cardinal astatine the commencement of the year.

Rapid Unwinding

Tighter monetary argumentation from cardinal banks seeking to stem a planetary surge successful ostentation has weighted heavy connected integer tokens, 1 of past year’s frothiest plus classes. The rout that started successful precocious 2021 gathered gait with the illness of the TerraUSD stablecoin successful May, past worsened further arsenic Bitcoin suffered its biggest-ever monthly driblet successful June.

With accelerated unwinding of leverage blowing up companies crossed the cryptosphere, Bankman-Fried emerged arsenic a lender of past resort, providing recognition to Voyager and striking a woody to inject superior into BlockFi Inc. Bankman-Fried, the co-founder of crypto speech FTX US, is besides unfastened to exploring acquisitions of battered crypto miners, helium said successful an interrogation past week.

“The large question is tin FTX backstop everything, they’re becoming a cardinal bank-like lender of past resort,” said Simon Taylor, caput of strategy and contented astatine crypto fraud prevention startup Sardine.

Bitcoin was down 1.2% astatine $20,196 connected Wednesday greeting successful Europe, taking this year’s diminution to 57%.

(Updates with details connected assets successful 5th paragraph.)

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