Voyager Digital, the digital asset brokerage firm, is the latest casualty as crypto valuations plummet, causing mayhem in the industry.
What is Voyager Digital?
Voyager Digital Ltd (OTC: VYGVF) is a digital asset brokerage that facilitated the trading of over 100 crypto assets and offered crypto payment solutions to both customers and merchants. Last week the company paused all withdrawals, trading, and deposits on its platform, citing the current market conditions following steps taken by Celsius, Babbel Finance, and Vauld.
The company filed for Chapter 11 bankruptcy protection late on Tuesday. This was despite a rescue loan last month from a trading firm controlled by FTX founder Sam Bankman-Fried. In the filing, the company claims it has over 100,000 creditors and liabilities between $1 billion and $10 billion. Its assets include $110 million of cash and “owned crypto assets” on hand and a further $1.3 billion in crypto assets on its platform.
Why did Voyager Digital enter bankruptcy?
Voyager Digital is the latest casualty of the collapse in crypto prices that has sparked a severe crisis in the digital assets market. Since the beginning of the year, Bitcoin and Etherium have experienced massive price declines of 57.9% and 69.8%, respectively. Sales of NFTs have also collapsed from a peak of $12.6 billion in January to just over $1 billion in June. The bankruptcy filing came one week after crypto hedge fund Three Arrows Capital collapsed. This caused a contagion affecting Voyager Digital, to whom the hedge fund owed $650 million.
What will happen next?
Voyager Digital aims to repay customers with crypto assets, proceeds from the Three Arrows bankruptcy, company shares when it returns from insolvency, and “Voyager tokens”. However, this is subject to court approval. It also holds $350 million of customers’ cash in U.S. dollar deposits at Metropolitan Commercial Bank.