Cryptocurrency company Voyager Digital files for Chapter 11 bankruptcy protection

Voyager said it holds about $1.3 billion worth of cryptocurrencies on its platform, with more than $350 million in cash on behalf of New York Metropolitan Commercial Bank clients.

Justin Sullivan | Getty Images

Besieged Cryptocurrency Broker Voyager Digital filed for Chapter 11 bankruptcy protection, the latest casualty in the turmoil in the digital asset markets.

On Tuesday, Voyager entered bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of New York, according to a company statement. The filing lists assets ranging from $1 billion to $10 billion and liabilities in the same range.

AT statementthe company said it holds approximately $1.3 billion in cryptocurrencies on its platform and holds more than $350 million in cash on behalf of New York-based Metropolitan Commercial Bank customers.

Voyager has suffered massive losses due to its exposure to crypto hedge fund Three Arrows Capital, which went bankrupt last week after defaulting on loans from a number of firms in the industry, including $650 million from Voyager.

“We strongly believe in the future of the industry, but prolonged volatility in the cryptocurrency markets and the default of Three Arrows Capital requires us to take decisive action,” Voyager CEO Steven Ehrlich said in a tweet early Wednesday.

Shares of the Toronto-listed company have lost nearly 98% of their value since the start of 2022.

Voyager says it is still seeking a refund from Three Arrows Capital, or 3AC as it is otherwise known, including through litigation in the British Virgin Islands and New York.

Voyager last week suspended all payments, deposits and trading on its platform due to “current market conditions”. Ehrlich said at the time that Voyager was looking for more time to explore “strategic alternatives with different stakeholders.”

Several other firms, including Celsius, Babel Finance and Vauld, have taken similar steps. On Tuesday, Wold received takeover bid by Nexocompeting firm, after suspends its services.

The cryptocurrency market is grappling with a major liquidity crisis as platforms struggle to cope with a flood of customer withdrawals amid the digital currency’s price plunge.

The fall of crypto began with a wide fall in risky assets as Federal Reserve began to tighten monetary policy and gained momentum after the collapse Terrathe so-called stablecoin venture, which was worth about $60 billion at its peak.

bitcointhe world’s largest token, had its worst month ever in June, falling 38%. Investors are gearing up for a much longer digital currency downturn, known as the “crypto winter.”

Restructuring plan

Voyager said the move will allow for a restructuring process so that customers can be compensated.

If all goes according to plan, users will receive a combination of cryptocurrencies in their accounts, proceeds from the recovery of funds from Three Arrows Capital, stock in the newly reorganized company, and Voyager tokens.

Customers with US dollar deposits will have access to their funds once the reconciliation and fraud prevention process with Metropolitan Commercial Bank is completed, Voyager said.

Alameda Research, billionaire Sam Bankman-Fried’s quantum trading shop, has expanded Voyager to $500 million credit line in cash and cryptocurrency last month in a futile attempt to prop up the company.

Alameda was listed as Voyager’s biggest creditor in Tuesday’s bankruptcy filing with an unsecured claim of $75 million.

Bankman-Fried, who also founded the FTX cryptocurrency exchange, has become a lender of last resort for a troubled industry. He recently agreed to a deal giving FTX opportunity to buy BlockFi crypto lending company to $240 million, a sharp drop from the $3 billion it was last valued at privately.

Some compare Bankman-Fried’s efforts to the role played by John Pierpont Morgan in saving Wall Street’s creditors from collapse after a series of bank runs known as the Panic of 1907 that preceded the creation of the Fed.