Voyager Digital files for Chapter 11 bankruptcy protection

ambcrypto.com:

Popular cryptocurrency lender Voyager Digital declared bankruptcy late Tuesday, becoming the second high-profile crypto-firm to do so in recent days. Voyager, based in Toronto, filed for Chapter 11 bankruptcy protection in the Southern District of New York on Tuesday. It estimates that it has more than 100,000 creditors and assets worth between $1 and $10 billion. The same range was also recorded for its liabilities.

Re-organization is typically allowed under Chapter 11, and it usually involves a corporation or partnership. A chapter 11 debtor typically offers a re-organization plan to continue operating its firm and pay creditors over time. According to a statement, the firm anticipates that “funds will be available for distribution to unsecured creditors.”

On 24 June, Voyager had claimed to have around $137 million in cash and crypto-assets in its possession. The company disclosed the following Monday that it had hired investment bank Moelis & Company as financial consultants and used $75 million of Alameda’s loan to enable customer orders and withdrawals. According to insiders, however, Alameda Ventures does not anticipate recovering that money.

The filing comes at a time when industry observers are closely examining Voyager’s business practices. Specifically, how the Canada-listed company stated in marketing materials that the Federal Deposit Insurance Corporation (FDIC) safeguarded investors’ deposits.

Although bank-held cash deposits up to a limit of $250,000 would be protected by FDIC insurance, funds that have been converted to stablecoins would not be covered.

Additionally, FDIC protection kicks in if a bank fails (in this case, Metropolitan Bank of New York, which banked Voyager). There is no back-up plan in case