Voyager Digital files bankruptcy, cites crypto volatility, 3AC default

By Sarah Lizee

Olympia, Wash., July 6 – Voyager Digital Ltd. filed Chapter 11 in the U.S. Bankruptcy Court of the Southern District of New York with plans to reorganize, according to a press release.

The company intends to seek recognition of the Chapter 11 case in the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act.

"This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers," Stephen Ehrlich, chief executive officer of Voyager, said in the release.

"Voyager's platform was built to empower investors by providing access to crypto asset trading with simplicity, speed, liquidity, and transparency.

“While I strongly believe in this future, the prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital (3AC) on a loan from the company's subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now.”

The company also announced the appointment of four new independent directors: Matthew Ray at Voyager Digital Ltd.; Scott Vogel at Voyager Digital Holdings, Inc.; and Jill Frizzley and Timothy Pohl at Voyager Digital LLC.

Plan terms

The proposed plan of reorganization would, upon implementation, resume account access and return value to customers.

Under this plan, which is subject to change given ongoing discussions with other parties, and requires court approval, customers with crypto in their accounts will receive in exchange a combination of the crypto in their account, proceeds from the 3AC recovery, common shares in the newly reorganized company, and Voyager tokens.

The plan contemplates an opportunity for customers to elect the proportion of common equity and crypto they will receive, subject to certain maximum thresholds.

Customers with dollar deposits in their accounts will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.

Holders of secured tax claims and other priority claims are unimpaired and deemed to accept the plan.

Alameda loan facility claims will be canceled with no distribution to holders.

Holders of general unsecured claims will receive their pro rata share of a claims allocation pool.

Holders of section 510(b) claims will have their claims canceled with no distribution.

Intercompany claims and interests will be either reinstated or converted to equity, otherwise set off, settled, distributed, contributed, canceled or released.

Existing equity will be canceled with no distribution.

The company said it continues to evaluate all strategic alternatives to maximize value for stakeholders.

Financials

The company has over $110 million of cash and owned crypto assets on hand, which will provide liquidity to support day-to-day operations during the Chapter 11 process, in addition to more than $350 million of cash held in the for benefit of customers (FBO) account at Metropolitan Commercial Bank.

Voyager also has about $1.3 billion of crypto assets on its platform, plus claims against 3AC of more than $650 million.

In its petition, the company listed $1 billion to $10 billion in liabilities.

Its largest unsecured creditor is Alameda Research Ltd., based in the British Virgin Islands, with a $75 million unsecured loan party claim. The rest of the unsecured claims over $1 million belong to customers.

Three Arrows default

Voyager Digital issued a notice of default to 3AC for failure to make the required payments on its previously disclosed loan of 15,250 bitcoin and $350 million USD coin.

Voyager is actively pursuing all available remedies for recovery from 3AC, including through a court-supervised process in the British Virgin Islands and a Chapter 15 case in New York.

Other details

The company engaged Moelis & Co. and Consello Group as financial advisers, Kirkland & Ellis LLP as legal advisers, and Berkeley Research Group, LLC, as restructuring adviser.

Voyager Digital is a cryptocurrency broker based in New York. The Chapter 11 case number is 22-10945.

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