Voyager Seeks Bankruptcy Protection Amid Crypto Credit Crisis
The Toronto-based lender filed for Chapter 11 bankruptcy in New York late Tuesday.
Crypto lender Voyager Digital filed for bankruptcy late Tuesday, becoming the second high-profile crypto firm to do so in recent days.
The Toronto-based Voyager filed for Chapter 11 bankruptcy protections Tuesday in the Southern District of New York, estimating that it had more than 100,000 creditors and somewhere between $1 and $10 billion in assets. It also recorded the same range for its liabilities.
The company believes that “funds will be available for distribution to unsecured creditors,” according to the filing.
Voyager Digital Holdings, Inc., Voyager Digital, LLC and Voyager Digital Ltd. all filed for bankruptcy.
Voyager joins Three Arrows Capital in filing for bankruptcy. Three Arrows, however, filed a Chapter 15 petition tied to an ongoing liquidation effort ordered by a court in the British Virgin Islands.
According to writer Frances Coppola, Voyager’s loan book accounted for nearly half of its total assets, and nearly 60% of that loan book was composed of loans to Three Arrows.
The filing comes as industry observers increase their scrutiny of Voyager’s business practices, particularly how the Canadian-listed firm marketed deposits’ Federal Deposit Insurance Corporation (FDIC) insurance to customers.
While FDIC insurance would indeed protect bank-held cash deposits up to $250,000, it would not cover cash converted to stablecoins. Commentators including Coppola have called Voyager’s marketing around its handling of deposits misleading.
Moreover, the FDIC insurance kicks in in the event of a bank failure – in this case, Voyager was banked by Metropolitan Bank of New York. There is no protection in the event of a Voyager failure.