Voyager to tweak plan following SEC statements; recoveries unchanged

By Sarah Lizee

Olympia, Wash., March 6 – Voyager Digital Ltd. has decided to modify its Chapter 11 plan following comments made by counsel for the Securities and Exchange Commission, according to documents filed March 3 with the U.S. Bankruptcy Court for the Southern District of New York.

The SEC had filed an objection to the plan, stating some activities proposed in the play may create unspecified securities law violations. When the court asked the SEC’s counsel to clarify the statement, counsel declined to take a position or provide guidance.

At the confirmation hearing held March 2, counsel for the SEC asked to supplement its prior statements in response to media reports. In sum, it stated that although the commission itself was still unable to take a position, its staff believed the VGX token may be a security.

Counsel for the debtors said Voyager disagrees with the assertion that VGX is a security, but it is critical that the debtors confirm a plan and execute on it soon to preserve value and maximize creditor recoveries.

“The debtors are burning more than $10 million a month,” counsel for Voyager said in a declaration.

“To the extent possible, these funds should be conserved for distribution to creditors. The debtors cannot responsibly delay any further to accommodate the SEC’s apparent evolving deliberative process.”

The debtors intend to amend the plan and proposed confirmation order to make it clear that, to the extent it is ultimately necessary, the distributions under the plan are exempt from applicable securities laws under 11 U.S. code section 1145.

None of the proposed activities in the plan are changing, and proposed or actual creditor recoveries will be the same following the plan modifications.

As previously reported, the plan was accepted by all voting creditor groups.

Plan terms

The company has received approval to sell its assets to BAM Trading Services Inc. (Binance US) in a transaction valued at roughly $1.02 billion based on the fair market value of Voyager’s cryptocurrency portfolio at a to-be-determined date in the future plus a $20 million incremental cash value.

After the sale closes, crypto will not be transferred to Binance unless it has the required licenses or authorizations to make distributions in a creditor’s state or territory; a creditor has signed up for Binance’s platform; that creditor has met Binance’s onboarding requirements; and Binance has received notice of the exact amount of distribution that will be made available to that creditor.

As a result, the time between when Binance receives the crypto and when creditors can access, trade, convert, sell, stake or withdraw that crypto is very limited.

There is also a mechanism under which account holders in unsupported jurisdictions may be able to receive distributions in kind, which is the preference of many creditors.

The plan includes a toggle feature, under which the debtors may return cryptocurrency, cash and other assets to claimholders if the sale transaction is unable to close on time.

Under the plan, secured tax claims and $1 million of other priority claims are unimpaired.

The voting classes include the account holder claims ($1,763,800,000 of claims with a projected recovery of 50% if there is a sale transaction) and three subclasses of general unsecured claims ($6.6 million for OpCo with a 50% recovery, $15.7 million for HoldCo with a 1% recovery and $3 million with a 66% recovery for TopCo, with estimated recoveries based on a sale transaction).

Deemed to reject the plan, with impaired claims, are the Alameda loan facility claimants ($75.1 million with no recovery), section 510(b) claimants and existing equity interests.

Presumed to accept and not entitled to vote are claimants with intercompany claims and intercompany interests.

Should the sale not close and the debtors find it necessary to conduct a Chapter 11 liquidation, the claimants might expect to receive less, especially the account holder class which would be facing a 45% recovery on their claims.

Voyager Digital is a cryptocurrency broker based in New York. The company filed bankruptcy on July 5, 2022 under Chapter 11 case number 22-10945.

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