The current bear market sentiment combined with a prolonged crypto crash is sweeping away several financial entities in its wake. The recently filed Voyager bankruptcy is just the latest incident in a string of shutdowns.
After the recent collapse of the Celsius Network, another crypto lender Voyager Digital has filed a chapter 11 bankruptcy.
In a press release by Voyager, the company cites 3AC's failure to repay the debt as one of the reasons for the firm to file for bankruptcy.
Voyager Digital Files For Chapter 11 Bankruptcy
Founded in 1993, Voyager Digital was founded as a crypto investment firm that had gained credible traction in recent times.
The company had paused its withdrawals and deposits a week ago, indicating its inability to navigate the prevalent crypto contagion.
Finally, on Tuesday, July 5, the company filed for Chapter 11 bankruptcy after one week of deliberations and speculations.
Per the official release, the company cites two different reasons. The high market volatility and the recent downfall of 3 Arrow Capital are named as the primary reasons that led Voyager to file for a chapter 11 bankruptcy. Voyager Digital's CEO, Stephen Ehrilc, said:
The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital (“3AC”) on a loan from the Company’s subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now.
What Is A Chapter 11 Bankruptcy?
Chapter 11 bankruptcy can be defined as one of the most complex bankruptcy procedures that allow a firm to "reorganize" its business while remaining functional and operational in the market.
If a company files for a chapter 11 bankruptcy, then a company is urged to propose a best-suited reorganisation plan for its creditors and customers.
Per the proposed plan outlined by the firm, the company would permit its users a "combination" of crypto held in each of their accounts, alongside the recovered funds from 3AC.
Under this Plan, which is subject to change given ongoing discussions with other parties, and requires Court approval, customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganised Company, and Voyager tokens.
The company also gave an overview of the funds held within its system, adding that it has over $110 million in cash and owned crypto assets in hand.
The firm also has $350 million in cash held with the For Benefit of Customers (FBO) account at Metropolitan Commercial Bank. It also adds that 3AC owes them more than $650 million in terms of funds.