Amid the Crypto Credit Crisis, Voyager Digital Files for Bankruptcy
- Late Tuesday in New York, the Toronto-based lender filed for Chapter 11 bankruptcy.
- Voyager Digital Holdings, Inc., Voyager Digital, LLC, and Voyager Digital Ltd. all filed for bankruptcy.
- Although the FDIC insurance would safeguard bank-held cash deposits up to a maximum of $250,000, it would not cover the money that has been converted to stablecoins.
Voyager Digital, a cryptocurrency lender, declared bankruptcy late Tuesday, making it the second well-known cryptocurrency company to do so recently. The Toronto-based Voyager, which said it had more than 100,000 creditors and anywhere between $1 and $10 billion in assets, filed for Chapter 11 bankruptcy protection on Tuesday in the Southern District of New York.
According to the filing, the company believes that “funds will be available for distribution to unsecured creditors.” Voyager Digital Holdings, Inc., Voyager Digital, LLC, and Voyager Digital Ltd. all filed for bankruptcy. This is a big blow to the company, as it was only recently that they had announced their plans to expand into Europe and Asia.
The filing stated that the decision was made “in light of recent events and challenges in the cryptocurrency markets.” It is unclear at this time what exactly those challenges are, but it is safe to say that they have taken a toll on Voyager Digital. This is evident in their share price, which has plummeted over 80% since January of this year.
In recent weeks, a number of cryptocurrency businesses, and lenders, in particular, have encountered solvency concerns that have prevented clients from withdrawing their money. With its announcement to halt withdrawals in mid-June, Celsius started this trend last month. Recent days have seen withdrawal limitations or outright halts declared by CoinLoan, CoinFLEX, and Voyager itself.
Alameda Research Ventures LLC and Alameda Ventures Ltd., two businesses connected to Sam Bankman-Fried, the creator of the cryptocurrency exchange FTX who has provided credit lines to or otherwise bailed out other crypto companies, are listed as equity holders in Voyager Digital, Ltd., according to the filing.
The dramatic fall in the stock price of Voyager, a digital asset brokerage, is a sign of just how quickly the fortunes of companies in the burgeoning cryptocurrency industry can change. Voyager sought to capitalize on the growing interest in cryptocurrencies by offering investors commission-free trading in a variety of digital assets. However, the company has been hit hard by the recent sell-off in cryptocurrencies, with its stock falling from above $20 last November to below a dollar last month.
In a blog post released yesterday, Voyager claimed that it still had $110 million in cash and was owed $650 million from Three Arrows Capital, one of its major shareholders. It also said that it had $350 million in cash at Metropolitan Bank, though it did not say what specifically the liabilities are. Despite these claims, however, many investors remain skeptical about Voyager’s financial stability and its ability to weather the current storm. With cryptocurrencies remaining highly volatile and many companies struggling to turn a profit, it seems likely that we will see more casualties like Voyager before this industry matures.