Crypto broker Voyager Digital files for bankruptcy amid Three Arrows fallout

Voyager Digital late last week temporarily suspended trading, deposits and withdrawal amid challenging market conditions. PHOTO: AFP

MUMBAI (BLOOMBERG, REUTERS) - The cryptocurrency sector's troubles deepened on Wednesday (July 6) as broker Voyager Digital filed for bankruptcy, becoming the second high-profile crypto firm after Singapore-based Three Arrows Capital to do so in recent days.

In its Chapter 11 bankruptcy filing on Tuesday (July 5), US-based Voyager estimated that it had more than 100,000 creditors and somewhere between US$1 billion (S$1.4 billion) and US$10 billion in assets, and liabilities worth the same value.

Chapter 11 bankruptcy procedures put a hold on all civil litigation matters and allow companies to prepare turnaround plans while remaining operational.

"We strongly believe in the future of the industry but the prolonged volatility in the crypto markets, and the default of Three Arrows Capital, require us to take this decisive action," chief executive Stephen Ehrlich said on Twitter.

Last week, Voyager said it had issued a notice of default to Singapore-based crypto hedge fund Three Arrows for failing to make required payments on a loan of 15,250 Bitcoin (approximately US$324 million) and US$350 million worth of USDC, a stablecoin.

Later that week Three Arrows, which was ordered into liquidation last month after failing to repay creditors, filed for chapter 15 bankruptcy, which allows foreign debtors to shield US assets.

Much of the crypto industry's recent problems can be traced back to the spectacular collapse of Singapore-based Terraform Labs' TerraUSD in May, which saw the stablecoin lose almost all its value, along with its paired token.

About US$2 trillion in market value has been wiped from the crypto sector since a peak last year, amid a global wave of monetary tightening that drained liquidity and blew up leveraged bets.

Trading, deposits, withdrawals and loyalty rewards on the Voyager platform remain temporarily suspended, Mr Ehrlich added.

Voyager said on Wednesday it has over US$110 million of cash and owned crypto assets on hand. It intends to pay employees in the usual manner and continue their primary benefits and certain customer programs without disruption.

The co-founder of crypto exchange FTX US Sam Bankman-Fried had acted as a sort of lender of last resort for Voyager by providing credit lines via Alameda Research. Voyager's filing lists US$75 million of unsecured loans from Alameda, making the firm the biggest single creditor.

Voyager offered crypto trading, staking - a way of earning rewards for holding certain cryptocurrencies - and yield products. Firms offering high-yield products including Celsius Network, Babel Finance and Vauld have suspended withdrawals as liquidity dried up.

Crypto markets weakened slightly after the latest filing. Bitcoin slipped about 2.4 per cent to US$19,950 as at 1.31pm in Singapore.

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