Many of Voyager Digital’s 3.5 million customers are contacting the bankruptcy judge.
Earlier this month, a crypto company called Voyager Digital went through a five-hour Chapter 11 bankruptcy hearing. al returns for leaving their tokens with Voyager.
As the cryptocurrency market grew last year, Voyager signed sponsorship deals with the NBA’s Dallas Mavericks and their owner, Mark Cuban, the NFL’s Rob Gronkowski, a NASCAR driver named Landon Cassill, and the National Women’s Soccer League.
Even though these names helped get the word out about the service, they didn’t change the risk that customers took when they signed up. Their money was not safe.
Crypto prices crashed in 2022, mostly because the Federal Reserve raised interest rates and investors moved out of the riskiest assets. This caused a liquidity crisis for hedge funds and crypto sites that had too much exposure to digital assets. Many of these companies didn’t pay back their loans, which caused a chain reaction that hurt the whole industry and lenders like Voyager.
In addition to the hearing in the Southern District of New York in early August, Voyager customers also had a chance to say what they didn’t like during a 52-minute virtual town hall with a livestream chat last week. There, they could talk to the “Voyager Official Committee of Unsecured Creditors,” a group put together by the bankruptcy court of SDNY to figure out how to divide up the assets.
Lawyers from McDermott Will & Emery, restructuring experts from FTI Consulting, and a small group of creditors make up the committee. They say that the main goal is to “quickly return USD and cryptocurrencies to creditors.”
Members of the committee talked about what had happened so far in the bankruptcy case, how long it was likely to take to get reimbursed, and how to file a claim. One member of the committee, though, said that the advice they were giving was “not legal advice” and that it was “strongly recommended” that individual creditors hire a lawyer to help them through this process.
At the time of publication, more than 4,000 people had watched the recording of the town hall on YouTube. Customers of Voyager had the chance to send in questions before the event last week. A lot of people also spoke up in the real-time chat on YouTube.
Cindy Wheeler wrote, “I was a fool not to take my crypto when I first heard about the loan. “Thought Voyager would be a good trade.”
Ari Gurewitz, another participant, talked about Three Arrows Capital (3AC), a crypto hedge fund that went bankrupt while owing Voyager over $650 million.
“It’s interesting that Voyager filed for bankruptcy before they knew how much the bankruptcy of 3AC would affect them,” Gurewitz wrote. “It makes me wonder if this is just a plan to reorganise and get rid of a lot of their losses at the expense of their customers.”
Voyager said that it owes money to about 100,000 people. They will have to vote in bankruptcy court on the plan Voyager makes, but many of them say they don’t have much of a say in the process. So, several customers are begging U.S. bankruptcy court judge Michael Wiles for help.
Customers at the town hall heard from the unsecured creditors committee that Voyager will soon send proof-of-claim forms to all creditors. These forms will show what Voyager thinks the creditors are owed in crypto, cash, or both.
Voyager has about $1.3 billion worth of crypto assets on the platform, $104 million in cash, and a $650 million claim against the now-defunct 3AC. So far, claims from creditors add up to $1.8 billion. When Voyager sends in its schedules this week, new numbers should be available.
The committee said that it was able to come up with a “very aggressive” plan timeline that aims for the end of October but could change. On that plan, payments to creditors wouldn’t start until at least November.
The committee said it was doing something “unprecedented” when it pushed for an interim distribution to help creditors while the bankruptcy process was going on.
Last Thursday was the first day that customers were supposed to be able to get some of their money back from the platform. However, there were very strict rules about who could get their money back.
Judge Wiles gave Voyager users who met certain requirements access to $270 million in cash that Voyager kept with Metropolitan Commercial Bank. Customers who had U.S. dollars in their bank account can now use the Voyager app to take out up to $100,000 in a 24-hour period.
Other Voyager users who have crypto-based funds still can’t get to their money.
During the town hall, one committee member said, “We know that many of you were told that the crypto you held on the Voyager platform was yours.” “Unfortunately for all of us, that’s not the legal test in bankruptcy to decide whether the cryptocurrency is your property or property of the bankruptcy estate.”