By Yifan Wang
Cryptocurrency broker Voyager Digital Ltd. said it has filed for Chapter 11 bankruptcy protection, days after it suspended withdrawals and trading on its platform amid growing turmoil in digital-currency markets.
The company said in a statement that it has initiated Chapter 11 restructuring in New York, where it is based, and will seek recognition of the case in Canada, where it is listed.
The voluntary filing comes after Voyager was caught up in the problems of Three Arrows Capital Ltd., a crypto hedge fund that suffered heavy losses from multiple cryptocurrencies since May. Three Arrows recently defaulted on a large loan from a unit of Voyager.
Voyager said it has around $1.3 billion of crypto assets on its platform, and more than $350 million in cash held for the benefit of customers at Metropolitan Commercial Bank. It had claims of more than $650 million against Three Arrows Capital as of June 30.
The company said it also has more than $110 million of cash and owned crypto assets that would help support its operations during the Chapter 11 process.
Voyager said that it is "actively pursuing all available remedies for recovery" from Three Arrows, including through court-supervised processes in the British Virgin Islands and New York. Last week, a court in the British Virgin Islands ordered the hedge fund to liquidate and appointed two executives from the global advisory firm Teneo to oversee the process.
The crypto broker last week announced the temporary suspension of trading, deposits, withdrawals and loyalty rewards on the Voyager platform, saying it needed time to explore strategic alternatives.
In its latest statement, Voyager said the suspension remains in place, and that it aims to resume account access once the restructuring is executed.
"The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan...require us to take deliberate and decisive action now," said Stephen Ehrlich, Voyager's chief executive. "The Chapter 11 process provides an efficient and equitable mechanism to maximize recovery."
Voyager said customers would be able to access their accounts upon implementation of the restructuring plan, receiving in exchange for crypto in their accounts a combination of crypto, proceeds recovered from Three Arrows, common shares and company tokens. The plan is subject to court approval and is subject to change given ongoing discussions with other parties, Voyager said.
Voyager added it has more than $110 million worth of cash and owned crypto assets on hand that will provide liquidity to support daily operations during the Chapter 11 process.
Cryptocurrencies have been hard hit in a time of sliding global markets and rising interest rates. Since bitcoin hit an all-time high in November, roughly $2 trillion of cryptocurrency value--more than two-thirds of all the crypto that existed--has been erased. Bitcoin itself has lost more than 56% of its value this year.
Other crypto companies have also been hard hit by the price plunge. Crypto lender BlockFi last week said it signed an agreement with crypto exchange FTX for a $400 million credit facility and gave FTX the option to buy BlockFi for $240 million. BlockFi said it has suffered about $80 million in losses from its exposure to Three Arrows Capital.
Voyager's shares, traded on the Toronto Stock Exchange, are down about 98% so far this year. The stock, which was trading at 25 Canadian dollars in November, has plummeted to 34 Canadian cents, giving the company a market value of roughly US$50 million.
Write to Yifan Wang at firstname.lastname@example.org
(END) Dow Jones Newswires
July 06, 2022 06:49 ET (10:49 GMT)Copyright (c) 2022 Dow Jones & Company, Inc.