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Voyager Digital, a cryptocurrency lender facing bankruptcy, has received court approval to initiate the liquidation of its assets and begin repaying customers a portion of their frozen funds.
Voyager Digital’s Asset Liquidation and Customer Repayment Plan Approved by Court
This significant development came during a court hearing in Manhattan, where US Bankruptcy Judge Michael Wiles granted approval to Voyager’s liquidation plan. It is worth noting that this decision comes after previous attempts to sell the crypto lender to FTX or Binance.US fell through.
Under the approved plan, customers are expected to receive approximately 36% of the amount they are owed. However, this recovery rate is significantly lower than the estimated 72-73% rate that would have been achieved if the acquisition plans with Binance.US had been successful.
It is important to highlight that the recovery rate has the potential to increase if Alameda Research, a defunct crypto trading firm, fails to reclaim $446 million from Voyager’s estate.
As part of their comprehensive strategy, Voyager’s legal advisors have made a deliberate choice to retain an additional sum of $259.6 million. This fund allocation serves the purpose of proactively addressing various essential aspects, including litigation expenses, administrative claims, and other necessary financial reserves.
By exercising such financial management, Voyager aims to navigate the intricate legal landscape surrounding its bankruptcy proceedings while ensuring the fulfillment of its commitments.
Voyager has implemented a streamlined solution for users who find themselves in possession of any of the 67 supported tokens, such as Bitcoin and Ethereum, which are currently inaccessible on the platform.
Voyager enables these individuals to directly withdraw the percentage corresponding to their eligible funds. By facilitating such direct withdrawals, Voyager aims to provide a seamless and efficient resolution for customers impacted by the platform’s operational challenges.
Liquidation and Return of Assets to Dissatisfied Voyager Customers
Voyager has been grappling with returning assets to investors since it filed for bankruptcy in July 2022, partially due to its exposure to the crypto hedge fund Three Arrows Capital.
Initial efforts to transfer Voyager’s assets to FTX were approved by a US bankruptcy court but ultimately collapsed. Subsequently, Binance entered the picture with a $1 billion valuation offer for Voyager.
However, this deal also fell apart recently due to regulatory concerns in the United States raised by the Securities and Exchange Commission and New York’s financial regulator.
Comparatively, Voyager’s customers face a significantly lower recovery rate than creditors of Celsius, another bankrupt crypto platform, who are estimated to receive 70% of their holdings back.
This disparity highlights the challenges faced by Voyager’s customers as they await the resolution of litigation with FTX, which seeks to recover $445.8 million in loan repayments made to Voyager before FTX’s bankruptcy. Voyager’s court filings suggest that if the litigation with FTX results in a favorable outcome, customers’ expected recovery rate could rise to 63.74%.
Voyager intends to return the same type of cryptocurrency that customers held in their accounts to facilitate customer repayments.
However, for deposits consisting of unsupported cryptocurrencies that cannot be withdrawn from the platform and for Voyager’s proprietary VGX token, customers will receive repayment in the form of the stablecoin USDC.
It is worth mentioning that Voyager’s bankruptcy filing in 2022 was part of a larger trend, with several other crypto lenders, including Celsius Network, BlockFi, and Genesis Global Capital, also seeking bankruptcy protection amidst the pandemic-induced crypto boom.
Taking a Retrospective Look at Voyager’s Journey to Bankruptcy
Voyager has gone through a bunch of radical changes over the last couple of years, and here’s a brief look at what made the company file for bankruptcy.
Voyager’s troubles began to surface in July 2022 when the company filed for bankruptcy protection. One of the contributing factors cited was the volatility within the cryptocurrency markets. However, it became apparent that Voyager’s exposure to the struggling crypto hedge fund, Three Arrows Capital, played a significant role in their financial predicament.
The default on a substantial loan made to Three Arrows Capital further exacerbated Voyager’s vulnerability, leaving the company struggling to regain stability.
Amidst their precarious situation, Voyager sought salvation in various ways, most notably through attempts to secure buyout deals. FTX, a once prominent crypto exchange, initially showed interest in acquiring Voyager’s assets and obtained approval from a US bankruptcy court. However, this glimmer of hope quickly faded as FTX faced its own implosion, leaving Voyager without a lifeline.
Soon after, Binance.US made an offer of a $1 billion buyout deal. The prospect of this acquisition rekindled hopes of a turnaround for Voyager. Unfortunately, these hopes were short-lived, as Binance.US ultimately called off the deal due to concerns over the “hostile and uncertain regulatory climate” in the United States.
This setback dealt a severe blow to Voyager’s aspirations of a successful acquisition, leaving them with limited options for recovery.
As Voyager’s financial woes persisted, the company made the difficult decision to file for Chapter 11 bankruptcy. This legal course of action aimed to protect the company’s assets and provide an opportunity for restructuring and reorganization. However, the ensuing months proved to be challenging, with Voyager facing numerous obstacles along the way.
Throughout the bankruptcy process, Voyager’s customers became increasingly concerned about the fate of their funds held on the platform. The lengthy legal proceedings and uncertainty surrounding the company’s future left customers feeling uneasy.
Their dissatisfaction further intensified when news emerged that Voyager’s legal team had decided to withhold additional funds, including $259.6 million, to cover litigation costs, administrative claims, and other holdbacks.
Despite the turbulent journey to bankruptcy, Voyager has demonstrated a commitment to mitigating the impact on its customers. Those who hold any of the 67 supported tokens on the platform, such as Bitcoin and Ethereum, have been granted the ability to directly withdraw the percentage they are eligible for. This provision aims to alleviate some of the financial strain experienced by affected users.
As we reflect on Voyager’s journey to bankruptcy, it serves as a reminder of the risks inherent in the cryptocurrency landscape. The company’s exposure to external factors, coupled with missed acquisition opportunities, ultimately led to its financial collapse.
Voyager’s story serves as a lesson, underscoring the importance of prudent financial management and adaptability in an ever-evolving industry.
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