Voyager Digital Customers Left High And Dry With Only 35% Crypto Deposit Recovery

Voyager

Antalya Turkey, 25 Januray 2020. Exchanging Bitcoin with United States Dollar Bill

According to a Reuters report, Crypto lender Voyager Digital’s efforts to reorganize under Chapter 11 have ended, with a U.S. Bankruptcy Judge approving their proposed liquidation plan. 

The company filed for bankruptcy protection last July due to volatility in cryptocurrency markets and a default on a large loan made to crypto hedge fund Three Arrows Capital, which will return customers about $1.33 billion in crypto assets. However, customers will only recover about 35% of their cryptocurrency deposits as the company winds down its operations after a failed buyout attempt by crypto exchange Binance.US.

Voyager Leaves Customers With Only Fraction Of Deposits

Voyager’s bankruptcy case was complicated by two failed sale attempts during the bankruptcy process. The company initially sought to sell its assets for $1.42 billion to FTX, a deal that failed when FTX imploded in November. Binance.US signed a $1.3 billion offer but called off the deal on April 25, citing a “hostile and uncertain regulatory climate.”

Per the report, Voyager customers’ recovery hopes are now heavily dependent on the outcome of litigation with FTX, which is seeking to claw back $445 million in loan repayments made to Voyager before FTX collapsed into bankruptcy.

However, If Voyager fully prevails in the FTX litigation, customers’ expected recovery would be 63.74%, according to Voyager’s court filings.

Voyager intends to repay customers with the same type of cryptocurrency that they had in their accounts. However, for deposits held in unsupported cryptocurrencies that cannot be withdrawn from Voyager’s platform and for Voyager’s proprietary VGX token, Voyager will instead repay customers using the Circle’s stablecoin USDC.

Voyager was one of several crypto lenders to file for bankruptcy in 2022 after a boom in the COVID-19 pandemic. Other companies that filed for bankruptcy include Celsius Network, BlockFi, and Genesis Global Capital. 

Did the SEC Play A Role in Binance.US’s Failed Acquisition?

There are speculations that the Securities and Exchange Commission (SEC) may have had a hand in Binance.US’s failed $1.3 billion acquisition of crypto lender Voyager Digital. The buyout was called off in April, with Binance.US citing a “hostile and uncertain regulatory climate.” However, some industry experts believe the SEC’s increased scrutiny of the crypto industry may have played a role in the failed acquisition.

The Securities and Exchange Commission has been ramping its efforts to regulate the cryptocurrency industry. As a result, firms like Coinbase have been exploring ways to expand their operations to other jurisdictions. 

France, in particular, has been welcoming these firms due to the regulatory uncertainty in the United States. Market experts and even senators have criticized this approach by the regulatory agency, who argue that a clear rulebook is needed to promote innovation and diversify investment opportunities for American clients of crypto firms. A clear regulatory framework will benefit not only the industry but also the country as a whole.

BTC’s sideways price action on the 1-day chart. Source: BTCUSDT on TradingView.com

Featured image from iStock, chart from TradingView.com 

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