The crypto winter is settling as the circumstances surrounding the downfall of Three Arrows Capital (3AC) last week take its toll on the industry, now witnessed in the filing of Chapter 11 bankruptcy via cryptocurrency brokerage firm Voyager Digital. The company announced its filing in a press release, citing the move as a "financial restructuring" due in large part to 3AC's defaulting on its $650 million loans.
The company filed its proceedings in the US Bankruptcy Court under the Southern District of New York on Tuesday, July 5, 24 hours before it suspended all withdrawals. In the filing, the firm listed its assets as between $1 billion and $10 billion, with liabilities in the same ballpark. Voyager Digital's holdings currently consist of $350 million in cash via New York's Metropolitan Commercial Bank alongside around $1.3 billion in crypto, according to its statement.
Voyager CEO Stephen Ehrlich, detailed in a Tweet early on Wed. that "prolonged volatility in the crypto markets" coupled with "the default of Three Arrows Capital" incited Voyager's need for restructuring. It is looking at options in recovering the lost funds from 3AC while participating in court proceedings in New York and the British Virgin Islands.
Related Article: Voyager Digital Puts Trading, Deposits, Withdrawl Activities on Pause Amidst Crypto Meltdown
Voyager Digital stock has dropped by about 98% since January, as the whole cryptocurrency market braced for a meteoric impact that it had never before seen. With the implosion of Celsius alongside the depeg of TerraUSD, the crypto industry no sooner was awash in selling as investors raced for the exit signs. Adding fuel to the fire is the still ever-rising Fed interest rate hikes as inflation wreaks havoc on the US economy.
As part of this process, the proposed Plan of Reorganization would resume account access and return value to customers. Under this Plan, which is subject to change given ongoing discussions with other parties, and requires Court approval:
— Stephen Ehrlich (@Ehrls15) July 6, 2022
Voyager's restructuring of the company will see it leveraging the bankruptcy proceeding to aid in reimbursing consumers through a combination of Voyager tokens, cryptocurrency from the likes of recovered 3AC assets, and Voyager Digital stock following its reorganization phase. Users with US dollar deposits within Voyager will be allowed to utilize their funds once a full audit is complete via the Metropolitan Commercial Bank, which will include fraud prevention and reconciliation processes.
The company still has a rather large line of credit in the form of $500 million in cash and crypto via Alameda Research, which extended the credit line last month to stave off Voyager's impending doom. Alameda is the firm's largest contributor in credit, holding an unsecured claim of around $75 million, according to Voyager's bankruptcy filing.
