Crypto companies file for bankruptcy en masse

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July 8, 2022

The onset of crypto winter brings big problems to this industry. As a result, more and more companies have filed for bankruptcy lately. It was recently reported that Voyager Digital filed for bankruptcy in a court in New York. It is worth noting that this is far from the first bankruptcy announcement we have received in the past few months.

Details

This company had over 100,000 customers. Experts estimate the number of liabilities from 1 to 10 billion dollars.

Together with it, two subsidiaries Voyager Digital Holdings Inc and Voyager Digital LLC filed for bankruptcy. It is assumed that the debt will be entirely restructured so that customers receive the necessary payments.

The bankruptcy of Voyager Digital is due to the recent default of Three Arrows Capital (TAC), which had significant loan obligations to Voyager Digital LLC. Thus, the company’s loan portfolio consists of 58% TAC loans. It is worth noting that the loan was made just a few days before TAC’s insolvency declaration.

As early as March 3, economist Francis Coppola said that because of such a considerable percentage, Voyager would have massive financial problems, and 2 days after that, the company filed for bankruptcy.

It is noted that Voyager Digital accounts still have quite significant assets:

  • 1.3 billion USD on the platform,
  • more than 350 million USD in an account with the Metropolitan Commercial Bank,
  • TAC claims over 650 million USD,
  • ~110 million USD in cash and own cryptocurrency assets.

It is enough for the company to continue to function, but declaring bankruptcy will allow it to restructure and cut costs to keep afloat until the end of the crypto winter. The founders are confident they will be able to bring the company out of the crisis and bring it to prosperity.

Clients with cryptocurrencies in their accounts are expected to receive a combination of cryptocurrencies, proceeds from the TAC recovery, common stock in the newly reorganized company, and Voyager tokens in return. It will offset losses and reassure investors.

Stephen Ehrlich assures clients with dollar assets will have access to the money after completing commissions at the Metropolitan Commercial Bank. He confirms that the company uses all possible methods to repair the damage.

On June 24, Voyager asked Three Arrows Capital to close a portion of the $25 million USDC debt and then demanded that the entire loan in BTC and stablecoins be repaid by June 27. Since this did not happen, the crypto broker sent a notice of default to TAC. And the day before, Voyager lifted withdrawal limits for users to protect their assets, fearing problems with TAC.

As you can see, Voyager tried to take steps to save the company. If the court declares bankruptcy, it will not mean it will completely close. It is assumed that the company will continue operating in a different format.

Such a collapse of large companies is explained by the sharp decline in the value of Bitcoin and other cryptocurrencies, which led to a huge crisis in the industry. Experts suggest that the bitcoin rate may fall to 10 thousand USD in the next few months.

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