Voyager Digital, the Toronto-listed crypto firm that lent bankrupt Three Arrows Capital $650 million, filed for Chapter 11 protection in New York bankruptcy court yesterday. At the end of the quarter to March 31, it said it had 1.2 million funded accounts.
Court filings show that its assets are between $1 billion and $10 billion, as are its liabilities. A balance sheet wasn’t filed, so the true deficit is currently unclear. (Update: a document shows its outstanding crypto loans amount to $1.1 billion.) Voyager requested to extend the deadline for sharing financial details. It had $5.8 billion in assets on the platform at the end of the first quarter.
The company says it currently has $1.3 billion in crypto-assets on its platform plus $110 million in crypto-assets and cash owned by the company. Additionally, $350 million of client cash is segregated in a client account and should be returned in full to customers, subject to compliance requirements.
If creditors and the courts agree, the company plans to reorganize into a new company and compensate customers through a mixture of returning some crypto-assets, any recovery from the Three Arrows debt, stock in a new co, and Voyager tokens.
“This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers,” said Stephen Ehrlich, CEO of Voyager.
While detailed figures were not available, its largest 50 creditors were listed. Sam Bankman-Fried’s Alameda Research organized a bailout of up to $500 million in June, but under the agreement, the company could only draw down $75 million so far, making Alameda the company’s largest unsecured creditor. Update: it turns out that Alameda was Voyager’s second largest borrower with outstanding crypto loans of $377 million.
There were three clients with more than $5 million in assets, which combined are owed $22.8 million. The next forty-five largest clients are owed a total of $75 million ranging from $955,000 to $3.3 million. But the biggest concern will be for the smaller clients, of which there are likely more than a million. The other significant unsecured creditor is Google which is owed almost $1 million.
As an idea of how quickly the company grew, at the end of December 2020, it had 43,000 funded accounts, compared to 1.2 million just 15 months later.
Kirkland & Ellis LLP are the legal advisors, and Berkeley Research Group is the restructuring advisor.
Apart from Three Arrows and Voyager, lending platform Celsius is also in trouble and halted client withdrawals. It has reportedly resisted filing for Chapter 11 with $11.8 billion in assets on its platform as of May 17.
Last Friday another crypto lender BlockFi received a $400 million line of credit and agreed an option to be acquired for up to $240 million by FTX US. On Monday, a much smaller crypto firm Vauld also halted withdrawals and yesterday signed a deal with crypto lender Nexo that may leads to its acquisition.