Voyager Seeks Bankruptcy Protection Amid Crypto Credit Crunch

Don’t miss CoinDesk Consensus 2022the must-attend crypto and blockchain festival experience of the year in Austin, TX, June 9-12.

Crypto lender Voyager Digital filed for bankruptcy on Tuesday evening, becoming the second high-profile crypto firm to do so in recent days.

The Toronto-based Voyager filed a claim Chapter 11 Bankruptcy Protections Tuesday in the Southern District of New York, estimating he had more than 100,000 creditors and between $1 billion 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. have all filed for bankruptcy.

Voyager joins Three Arrows Capital in filing for bankruptcy. Three Arrows, however, has filed a Chapter 15 petition related to an ongoing liquidation effort ordered by a court in the British Virgin Islands.

According writer Frances CoppolaVoyager’s loan portfolio represented nearly half of its total assets, and nearly 60% of that loan portfolio consisted of loans to Three Arrows.

FDIC protections?

The filing comes as industry watchers step up their scrutiny of Voyager’s business practices, particularly how the Canada-listed company markets Federal Deposit Insurance Corporation (FDIC) deposit insurance to customers.

While FDIC insurance would indeed protect cash deposits held by banks up to $250,000, it would not cover cash converted into stablecoins. Commentators including Coppola have called Voyager’s marketing around its deposit management is misleading.

Additionally, FDIC insurance comes into effect in the event of a bank failure – in this case, Voyager was banked by the Metropolitan Bank of New York. There is no protection in the event of a Voyager breakdown.

Comments are closed.