Voyager News: Bankrupt Voyager ’s Customers Face an Uphill Battle to Recover Their Funds

2022/07/13By:

Voyager News: Voyager Digital, a major cryptocurrency lender, has declared bankruptcy. Those who put money into it are soon to discover just how time-consuming and expensive it can be.

One of several companies that collected crypto deposits and paid out high interest rates to their clients was Voyager (ticker: VOYG.CA). That yield was achieved by lending the tokens to other investors at even higher interest rates.

Some large crypto borrowers, such as the hedge fund Three Arrows Capital (3AC), have ceased paying their obligations as a result of the recent market volatility. Depositors have been clamoring for their money to be returned.

 

Voyager Put a Halt to Withdrawal

Voyager put a halt to withdrawal requests on last Friday. One of these companies has filed for bankruptcy protection, citing 3AC’s own bankruptcy as well as an all-around decline of cryptocurrency prices. Voyager stock traded at 34 cents on Tuesday, down 99 percent from its November high, prior to the filing.

Many Voyager depositors may have been unaware of the dangers they were putting their money in when they deposited it there, and it is unclear what will happen to those people now. On Wednesday, Voyager announced that it has $1.3 billion in crypto on its platform, as well as a bank account that holds $350 million in cash for consumers. By last week’s petition, 3AC attorneys had claimed that the company had failed “in the midst of severe volatility in cryptocurrency markets,” and the corporation owes $650 million.

After it emerges from Chapter 11, Voyager’s bankruptcy filing proposes that consumers receive “Voyager” tokens and revenues from its efforts to reclaim money from 3AC. Reconciliation and fraud prevention processes will be completed before monies may be returned to consumers, according to a press release published by the company.

“We strongly believe in the future of the industry, but the continued volatility in the crypto markets, and the default of Three Arrows Capital, necessitate this immediate decision,” stated Voyager CEO Stephen Ehrlich in a tweet announcing the bankruptcy.

According to Cornell Law School professor Dan Awrey, depositors will have to wait months, if not years, to see any of their money recovered. There is no timetable for when Awrey expects them to get their money back.

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Voyager Has its Own Strategy

Voyager has its own strategy for how depositors should be rewarded in its reorganization, but other creditors may opt to battle for a larger share of the pie. The bankruptcy judge would have to make a ruling after a long court process. In addition, Voyager’s claim that dollar deposits kept on behalf of consumers at a bank will be returned to them immediately is also hard to believe, Awrey argues.

The Federal Deposit Insurance Corp. makes sure that clients of failing banks can rapidly access their money. However, this safety net is only activated in the event of a bank failure. As a result of Voyager’s lack of a banking license, depositors of US dollars may be considered as unsecured creditors in court, Awrey adds.

There are “ongoing conversations with other parties,” including potential financial and strategic backers, as well as a need for judicial permission before Voyager’s plan can be finalized. When asked about the company’s policy on U.S. dollar deposits, he said nothing.

There are “ongoing conversations with other parties,” including potential financial and strategic backers, as well as a need for judicial permission before Voyager’s plan can be finalized. When asked about the company’s policy on U.S. dollar deposits, he said nothing.

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