Voyager said it has approximately $1.3 billion in cryptocurrencies on its platform and holds over $350 million in cash on behalf of clients at the Metropolitan Commercial Bank of New York.
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Besieged crypto brokerage Voyager Digital has filed for Chapter 11 bankruptcy protection, making it the latest chaos casualty in the digital asset markets.
Voyager began bankruptcy proceedings in the US Bankruptcy Court for the Southern District of New York on Tuesday, according to a filing from the company. The filing lists assets between $1 billion and $10 billion and liabilities in the same range.
The company said in a statement that it has approximately $1.3 billion in cryptocurrencies on its platform and holds over $350 million in cash on behalf of clients at the Metropolitan Commercial Bank of New York.
Voyager suffered huge losses from exposure to crypto hedge fund Three Arrows Capital, which went bankrupt last week after Voyager defaulted on loans from a number of firms in the industry, including $650 million.
“We strongly believe in the future of the industry, but the prolonged volatility in the crypto markets and the default by Three Arrows Capital require us to take this decisive action,” Voyager CEO Stephen Ehrlich said in a tweet earlier on Wednesday. Said.
Shares of the Toronto-traded firm have lost about 98% of their value since the start of 2022.
Voyager said it continues to recover funds from Three Arrows Capital, or 3AC as it is otherwise known, including in court-controlled transactions in the British Virgin Islands and New York.
Last week, Voyager paused all withdrawals, deposits and trading on its platform due to “current market conditions”. At the time, Ehrlich said Voyager was seeking additional time to explore “strategic alternatives with various interested parties.”
Many other firms, such as Celsius, Babel Finance, and Vauld, have taken similar steps. On Tuesday, Vauld received a takeover offer from rival firm Nexo after suspending its services.
The crypto market is grappling with a severe liquidity crisis as platforms struggle to meet the flood of withdrawals from customers amid the sharp decline in digital currency prices.
The declines in crypto began with a broad decline in risk assets as the Federal Reserve began monetary tightening and accelerated after the collapse of Terra, the so-called stablecoin startup worth nearly $60 billion.
Bitcoin, the world’s largest token, had its worst month on record, falling 38% in June. Investors are preparing for a much longer dip in digital currencies known as the “crypto winter.”
Voyager said the move will allow customers to implement a restructuring process so that they can be reimbursed.
If everything goes according to plan, users will receive a combination of crypto in their account, from the recovery of funds from Three Arrows Capital, shares of the newly reorganized company and Voyager tokens.
Voyager said customers with US dollar deposits will be able to regain access to their funds after a settlement and fraud prevention process has been completed with Metropolitan Commercial Bank.
Alameda Research, the quantitative commerce store of billionaire Sam Bankman-Fried, gave Voyager $500 million in cash and crypto loans last month in a futile attempt to take down the company.
Alameda was listed as Voyager’s largest creditor in Tuesday’s filing for bankruptcy with an unsecured claim of $75 million.
Bankman-Fried, who also founded crypto exchange FTX, has become a lender of last resort for the troubled industry. It recently agreed to a deal that gives FTX the option to buy crypto lending firm BlockFi for $240 million – a dramatic drop from the $3 billion it was last valued privately.
Some have compared Bankman-Fried’s efforts to the role played by John Pierpont Morgan in saving Wall Street lenders from collapse after a series of bank runaways that preceded the formation of the Fed, known as the panic of 1907.