Lender Voyager Digital files for bankruptcy as crypto contagion continues. Voyager digital currently holds billions of assets in crypto and it is now the latest lender to suspend its withdrawing activities.
Lender Voyager Digital Files for Bankruptcy As Crypto Contagion Continues
The latest scourge of crypto decline keeps on going and on Tuesday voyager digital which is a cryptocurrency lender filed for bankruptcy. With that being said, the company is now the latest to falter since the crypto market started to crash back in April. The company which is a buying, trading, and lending platform is reported to have an estimate of 1 to 10 billion USD in both liabilities and assets.
Causes of the Current Financial State Of Voyager Digital
Stephen Ehrlich, the CEO of voyager digital in the filing said that the bad financial state of the company was caused by two main issues. The first issue is the high inflation and interest rates which have caused a dump in the prices of crypto which have seen bitcoin go down by 60% from its all-time high in 2021. The second issue here is that three arrows capital which is a crypto hedge fund defaulted on a $650 million loan that was issued by voyager back in march.
This is simply an example of the contagion effect that has helped to drive down the value of crypto in recent months. The contagion started with Luna which is a cryptocurrency that collapsed back in May after its associated TerraUSD stablecoin depegged. That crash alone took a whopping sum of $14 billion from the market and in the process took a huge hit on firms holding Luna and TerraUSD.
Three Arrows which is a firm based in Singapore is one such firm. The company filed for chapter 15 bankruptcy just last week days after it had issued a notice of default on the $650 million it had loaned out to 3AC.
Other Companies Affected By the Crypto Dip
The crypto lender that is backed by Peter Thiel suspended all withdrawing activities. Genesis which is a crypto broker also lost hundreds of millions due to the bankruptcy of 3AC reportedly. News reports also came in that an investment fund based in Korea lost 99% of its customer funds due to the collapse of Luna.
Fortune reported that Three Arrows capital managed to recuperate an estimated $10 million back in March. And while 3AC is currently in the process of a court ordered liquidation, the leaders of voyager digital hope that the filing for bankruptcy is the first step of a major turnaround.
Chapter 11 bankruptcy steps normally allow companies to plan turnaround strategies and restructures while protecting them at the same time from law suits. Voyager digital was listed on the Toronto stock exchange just before the trading of its stock was suspended following its filing for bankruptcy.
The Content of the Filing
‘This is not a ‘free-fall’ filing without direction,’ the filing states. On the contrary, Voyager has a path forward and a plan to swiftly bring these chapter 11 cases to an appropriate conclusion.’ A plan outlined by Ehrlich which is subject to change and a pending court approval would see the customers of voyager still having crypto in their wallets get proceeds from the recovery of funds from 3AC, shares in the reorganized voyager digital company and also voyager crypto tokens.