⚡️⚡️⚡️
With energy prices rising, switch to a cheaper plan
💡
Compare Prices Now
⚡️⚡️⚡️

Crypto broker Voyager files bankruptcy; what happens to customers?

Posted: 7 July 2022 11:15 am
News
VoyagerCryptoBroker_Supplied_1800x1000

Stung by the collapse of Three Arrows and the crypto downturn, Voyager files Chapter 11. Withdrawals are on hold and, yes, some customers may well lose money.

The crypto meltdown has claimed another victim with brokerage Voyager Digital filing for Chapter 11 bankruptcy protection.

Voyager suffered a big hit from the collapse of crypto hedge fund Three Arrows Capital, which defaulted on massive loans from a variety of crypto industry firms – including US$650 million borrowed from Voyager.

"Today we began a voluntary financial restructuring process to protect assets on the platform, maximize value for all stakeholders, especially customers, and emerge as a stronger company. Voyager will continue operating throughout," Voyager chief Stephen Erlich tweeted.

What it means for customers isn't clear, but it's likely they will lose some of their assets.

What happens to customers' money?

In a statement, Voyager said it has US$1.3 billion in crypto assets on its platform and US$350 million in cash at New York's Metropolitan Commercial Bank. It claims between US$1 billion and US$10 billion in assets, and debts in the same range.

Voyager suspended trading, deposits and withdrawals on July 1, and that remains in force.

The company statement says customers with USD deposits will be able to access those funds after bank processing but gives no timeline. Those with crypto will receive "a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens."

Bloomberg notes that the court filing acknowledges customers will be "impaired," legalese for saying they may not get everything they had with Voyager back.

Voyager stock investors are likely also disappointed. The stock, listed in Toronto and traded over the counter in the US, is down 97% in 2022.

Crypto industry shakeout

The bankruptcy is one of the latest developments in what could turn out to be a major shakeout of the crypto sector. The deep decline in crypto values – Bitcoin is down 70% from its peak last fall – has meant big losses for any firm with assets in crypto, as well as less trading revenue and other impacts.

That combined with the collapse of the Terra ecosystem, in which Three Arrows for one was deeply invested, has a lot of crypto companies scrambling. BlockFI just signed a deal to be acquired by FTX to escape its cash crunch, for example, and broker Celsius has placed a hold on US$8 billion in deposits while it reportedly tries to avoid bankruptcy.

Strong players have emerged as well, with FTX and its billionaire founder Sam Bankman-Fried, in particular, putting money into some of the struggling firms.

While the full toll remains to be seen, more bankruptcies and acquisitions appear likely.

Trying to get a handle on the markets? Cut through the noise with our overview of the best cryptos to buy right now, explore some strategies for how to trade crypto or see if there's a better platform for you with our guide to the best crypto exchanges.

Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Get into cryptocurrency

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site