Can Voyager Stretch Its Voyage? Follow-up of the Fall of Voyager

Several crypto-related companies are facing serious financial difficulties amid the "crypto winter", including bankruptcy, and Voyager is one of them. Voyager Digital (Voyager) is the third bankrupt crypto firm that Fazzaco has tracked this year, following crypto hedge fund Three Arrows Capital and another crypto lending firm Celsius, whose bankruptcy Fazzaco has detailed before.

After nearly a month of auction bidding, the bankrupt crypto lender finally agreed to sell its assets to FTX US, a crypto exchange giant, for $1.4 billion late last month. Just this week, however, the acquirer was accused of operating illegally, and the deal was rejected by state regulators in the United States. Where the hell will Voyager be going...

In this article, Fazzaco reviews the signs leading up to Voyager's bankruptcy and the progress afterwards in recent months. We'll see if Voyager can stretch its voyage in the "crypto ocean".

Sudden Spurt of Activity Prior to Collapse

In fact, the "crypto winter" started earlier than most people thought. Analysts said that crypto winters usually begin when there is a steep sell-off from an all-time high in the price of Bitcoin. BTC hit a 52-week high of $68,990 in November 2021 before starting an extended downwards plunge. The collapse of TerraUSD and LUNA in this May resulted in $40 billion in investor losses and has had domino effects throughout the crypto industry. Fazzaco has published a timely article on the crash in the same month.

However, Voyager did not appear sluggish development but rather showed a trend of upstream before June. On May 16, the company announced revenue and user metrics for the fiscal 2022 third quarter ended March 31, 2022, revealing revenue for the quarter rose by 70% on a YoY basis. It also revealed on May 17 that it had raised $60 million in a private placement. With the addition of $50 million in crypto assets, it had more than $225 million in available liquidity. The massive flow of money made Voyager confidence and allay concerns about its financial health.

Bankrupts, Delists and Regulatory Warns

The crackdown came unannounced. Voyager suspended its service of trading, withdrawals and deposits crypto on July 1 after Three Arrows Capital (3AC)​, a crypto hedge fund, filed for bankruptcy on June 28. The lender cited 3AC's failure to make require payments on its loan of 15,250 BTC ($294 million) and $350 million USDC as a primary reason for its financial troubles.

On July 5, Voyager filed for Chapter 11 bankruptcy protections​ in the Southern District of New York. The lender's loan book accounted for nearly half of its total assets, and nearly 60% of that loan book was composed of 3AC. It also owed Google nearly $1 million, according to the filing.

On July 8, Voyager announced its voluntary delisting of common shares from the Toronto Stock Exchange

In addition, the involvement of regulators has exposed more problems with Voyager. The Federal Deposit Insurance Corporation (FDIC) had been looking into Voyager and its marketing of deposit accounts for cryptocurrency purchases ,as reported on July 7, citing confirmation by an FDIC official. While the crypto lender was not an FDIC-insured bank, it claimed to be FDIC-insured through a banking partner.

The Federal Reserve ordered Voyager on July 28 to cease any representations that its customers' funds would be protected in case of the company's failure.

Follow-up of Voyager's Bankruptcy

Voyager had further filed a motion in the Court in mid-July, seeking to liquidate cryptocurrency and sweep cash from third-party exchanges into the Debtors' operating accounts. According to the company, to do this is a protection and preservation of estate assets for the benefit of all clients given the current market volatility.

Earlier in August, the company had been granted approval by the U.S. Bankruptcy Court in New York to return $270 million in customer funds.

According to a court filing on September 18, Alameda Research, a quantitative cryptocurrency trading firm announced to repay some $200 million in loans to the bankrupt crypto lender, greatly reducing the debt burden on Voyager.

It is worth mentioning that Ashwin Prithipaul, CFO at Voyager, decided to resign at the end of September, and the company's CEO Stephen Ehrlich took over his responsibility.

FTX to Acquire Voyager

Back in late July, FTX Trading Ltd. (FTX), a leading global cryptocurrency exchange, had proposed a joint plan to offer early liquidity to customers of Voyager.

On September 13, Voyager auctioned off the remaining assets at Moelis & Company's New York offices, with Binance, Wave Financial, and the coveted FTX joining the bidding.

According to a statement from Voyager on September 26, FTX US won the bidding war​ to require its assets. The purchase agreement between the crypto lender and FTX US would be presented for approval in court on October 19, 2022. 

The deal was valued at about $1.422 billion, comprised of "additional consideration" worth about $111 million and the fair market value of all the cryptocurrency at the bankrupt platform.

However, the transaction did not go well. On October 12, Voyager's executives included sweeping legal immunity for themselves in the proposed sale agreement. Voyager's unsecured creditors committee (UCC) pushed back against the provision for "broad releases" that would shield the individuals "principally responsible for the debtors' financial woes" from future lawsuits.

On October 14, regulators from the state of Texas and the state's attorney general objected to the deal as they needed to "determine whether FTX US is complying with the law."
An ongoing investigation showed that FTX's yield program appeared to be regulated as a security in Texas, but it didn't, revealed Joseph Jason Rotunda, the director of the Enforcement Division of the Texas State Securities Board.

Fazzaco will continue to track and report on the bankruptcy case of Voyager closely.