Voyager Digital files for bankruptcy protection as crypto crisis deepens

Voyager Digital has filed for US bankruptcy protection, the latest victim of the sharp decline in cryptocurrency prices that has sparked a crisis in the digital asset market.

The Toronto-listed broker and lender filed for Chapter 11 bankruptcy in New York federal court late Tuesday after suffering losses of more than $650 million on a loan to Three Arrows Capital, the failed crypto investor.

Voyager's collapse came less than a week after it halted trading and prevented customers from withdrawing money.

Singapore-based Three Arrows, known for its aggressive bets on rising crypto prices, had borrowed heavily from major industry players to bolster its market bets, leaving it heavily underwater as digital token prices fell. Prices of leading cryptocurrencies have plunged about 70 percent since their peak late last year.

The company went bankrupt despite a rescue loan last month from Alameda Research, the trading firm controlled by FTX founder Sam Bankman-Fried. Voyager had drawn down the maximum allowable $75 million in a single 30-day period, making Alameda its largest unsecured creditor, bankruptcy filings showed.

Voyager's collapse will be widely felt as the company had a large customer base among do-it-yourself crypto investors. At the end of March, its liabilities stood at $5.7 billion. The Chapter 11 petition seeks to provide Voyager with protection from legal claims while it undertakes a restructuring.

The company said in the filing that it has more than 100,000 creditors and liabilities ranging from $1 billion to $10 billion. The company owes Google nearly $1 million, filings showed, with the rest of its largest unsecured creditors being customers.

Voyager said it has $110 million in cash and “captive crypto assets,” as well as $1.3 billion in crypto assets on its platform.

Pending court approval, it hopes to repay customers with "a combination" of crypto assets, proceeds from Three Arrows' bankruptcy, shares in the company when it reemerges from bankruptcy, and "Voyager tokens."

The company said it also holds $350 million of customer funds in U.S. dollar deposits in a collection account at Metropolitan Commercial Bank in New York. Customers would be repaid following “a reconciliation and fraud prevention process,” it said.

Metropolitan said the Voyager customer funds it holds are protected by U.S. federal deposit insurance for up to $250,000 per depositor for each account holder category. The account does not hold any cryptocurrency or other assets, it added. Voyager has said in the past that the FDIC would refund "USD funds" if "the company . . . fails."

Stephen Ehrlich, Voyager's chief executive, said following the filing: "We strongly believe in the future of the industry, but continued volatility in crypto markets and the failure of Three Arrows Capital require us to take decisive action."

The downturn has also hit New Jersey-based lender Celsius, which froze customer withdrawals, and rival BlockFi, which also lent money to Three Arrows and secured a rescue loan from FTX, giving the exchange the right to buy the company.