The Wall Street Journal reported that the U.S. Bankruptcy Court in New York has allowed cryptocurrency brokerage Voyager Digital permission to repay $270 million to impacted customers.
Voyager was permitted to refund money to clients held in custodial accounts at the Metropolitan Commercial bank on Thursday by presiding judge Micheal Wiles (MCB).
In July, as cryptocurrency values crashed and a bank run resulted, the New Jersey-based crypto company filed for chapter 11 bankruptcy, forcing Voyager to cease withdrawals.
After the liquidity crisis, Voyager asked the court for authorization to grant client withdrawals for cash funds kept in possession at the MCB.
Voyager claimed that the platform’s remaining funds, which amount to just over $1 billion, are property of the bankruptcy estate and will be divided among all creditors.
The bankruptcy of Voyager coincides with their exposure to renowned cryptocurrency hedge fund Three Arrows Capital (3AC).
Chronicling Voyager’s Borrowings
3AC received a $660 million loan from Voyager but could not pay it back due to the hedge fund’s $200 million exposure to Terra.
Stephen Ehrlich, the CEO of Voyager, turned to Moelis & Company for financial advice due to 3AC’s default.
Additional loans to Voyager include $17.5 million through cryptocurrency lender Genesis Global Capital and $34.4 million via Mike Novogratz’s investment company Galaxy Digital.
Genesis Global Capital and Galaxy Digital both had exposures to 3AC & Terra.
After its exposure to Terra in May, Galaxy Digital initiated a $10.6 million repurchase program for shares.
The chief executive officer of Michael Moro Genesis acknowledged in a tweet series that the lending to Three Arrows used to have a weighted average reserve requirement of more than 80% without revealing the amount of the loans.
3/ The loans to this counterparty had a weighted average margin requirement of over 80%. Once they were unable to meet the margin call requirements, we immediately sold collateral and hedged our downside.July 6, 2022
Excessive client awards could potentially be one of the causes of Voyager’s bankruptcy.
Following an agreement with the Dallas Mavericks, the company paid $100 in cryptocurrency rewards and offered yearly returns of between 8% and 10% on more than 40 assets.
Voyager anticipates concluding the selling process in September with an offer from FTX Trading to buy part of the company’s assets and some of its clients.