QUADRIGA INITIATIVE
CRYPTO WATCHDOG & FRAUD RECOVERY PLATFORM
A COMMUNITY-BASED, NOT-FOR-PROFIT
$5 900 000 000 USD
JULY 2022
UNITED STATES
VOYAGER DIGITAL
DESCRIPTION OF EVENTS
"Voyager is a crypto firm that offers broking services – finding the best prices for cryptocurrencies that customers want to buy or sell – as well as borrowing digital assets from customers in exchange for yields of up to 12%, and then lending them out."
"Join the financial revolution" "Earn up to 10%* interest APR. 50+ Digital Assets Commission-Free**. Crypto Made Simple" "Earn up to 10% interest APR on stablecoins and 7.25% on Bitcoin. Beat your bank by earning compounding interest each month on 24 top digital assets. No lockups and no limits!"
"We believe that crypto assets are the future of finance and investing. Together, we are creating the broker that the crypto market deserves. We are a team of finance and technology industry veterans dedicated to empowering and servicing investors in the most exciting asset class to date – crypto. Our founders have combined their decades worth of experience from leading organizations like E*TRADE, Uber, TradeIt, Lightspeed Financial and more, to bring you Voyager. Our mission is to provide every investor with a trusted and secure access point to crypto asset trading. We offer best-in-class customer service, incomparable access to the most popular assets and commission-free trading."
"Fund your account and instantly trade all of your favorite coins. Voyager supports Bitcoin, top DeFi coins, stablecoins, and a wide variety of altcoins." "Voyager is commission-free* and navigates the market, so you don’t have to. With Voyager’s Smart Order Router technology, we explore and connect to top exchanges to find you the best price for your trades."
"The Services are offered and available to persons residing in the United States." "With over 2.7 million verified users, Voyager was an extremely popular crypto broker to buy and sell crypto. But, even more than that, you could also earn money on crypto you left with voyager - up to 9 to 10 percent."
"Our straightforward, low-risk approach to asset management is the result of our decades of experience leading companies through market cycles. We have the experience to back our decisions and weather any bear market."
"Honesty and transparency are our top priorities. Voyager is audited to ensure every asset is accounted for in our secure system." "Rest assured knowing our advanced technology is preventing hackers and fraud, always securing your funds." "Our banking partner that holds your USD is FDIC insured, so the cash you hold with Voyager is protected."
"Trading on the Voyager app is currently available to all U.S. residents, excluding New York state. We are actively working with regulators to obtain a BitLicense to operate in New York and internationally later this year. Sign up for our newsletter to find out where we go live next!"
"Cuban and the Dallas Mavericks announced a five-year partnership with Voyager in October 2021, making Voyager the official cryptocurrency brokerage of the Mavericks. Their signage appeared throughout the American Airlines Center during Mavericks’ home games during the 2021-22 season."
“We understand that there’s a lot of hype, a lot of discussion behind it, but most people don’t understand the fundamentals behind it,” Cuban said about cryptocurrency during the press conference announcing the partnership.
“We’re really going to try and bring that level of education to our fans and to our joint customers. I think we’re going to extend this far deeper than just Mavs fans. I think Voyager is going to be a leader among sports fans and crypto fans around the country.”
As of February 15th, 2022, "The total verified users on the platform stand at more than 3.2 million, which is up 49 per cent from the last quarter and total assets on the platform are now up to $5.9 billion."
“More importantly, we delivered significant revenue growth and supported a marked increase in customer activity without any material system issues during the quarter, highlighting the steps we’ve taken to build out the scale and security of the Voyager platform in 2021, as we position Voyager for a series of product roll outs in calendar 2022.”
"Before the firm declared bankruptcy, investors who searched for 3AC learned that the firm had an estimated $10 billion in assets under management. After Voyager’s CEO, Stephen Ehrlich, looked at that huge sum, he, like many others, did not believe he would need assets to back loans of over $660 million. Within a few months, 3AC’s AUM shrank to $4 billion. The devaluation in crypto tokens hurt 3AC’s ability to pay its debt."
"Three Arrow Capital’s problems appeared to begin [on June 14th, 2022] after Zhu tweeted a rather cryptic message that the company is “in the process of communicating with relevant parties” and is “fully committed to working this out.”"
"On 16 June 2022, the Financial Times reported that Three Arrows had failed to meet its margin calls. On 22 June, The Wall Street Journal reported that Three Arrows had failed to repay money lent from cryptocurrency broker Voyager Digital. On 27 June 2022, Voyager Digital issued a notice of default against Three Arrows for failing to make the required payments on a Bitcoin and USD Coin loan worth more than $665 million. On the same day, a court in the British Virgin Islands ordered the liquidation of Three Arrows Capital, overseen by Teneo. The Joint Liquidators are Russell Crumpler and Christopher Farmer, both Senior Managing Directors of Teneo. The fund filed for Chapter 15 bankruptcy to protect its US assets from creditors."
"Voyager said it had issued a notice of default to the Singapore-based crypto hedge fund Three Arrows Capital for failing to make required payments on a loan of 15,250 bitcoins (approximately $324m) and $350m worth of USDC, a stablecoin. Later that week, the hedge fund filed for Chapter 15 bankruptcy, which allows foreign debtors to shield US assets from creditors." "The company [had] requested a $25M USDC repayment by June 24, 2022, and payment in full by June 27, 2022." "The announcement did not make any mention of whether Voyager held collateral on its loan to Three Arrows. It declined to comment further."
"According to court liquidation papers, Davies and Zhu have not been cooperating in the liquidation process of Three Arrows Capital, and their whereabouts was unknown as of 8 July 2022. Three Arrows Capital owes 27 creditors a total of $3.5 billion USD. In an interview with Bloomberg held at an "undisclosed location" in July 2022 Zhu and Davies remarked that they plan to move to the United Arab Emirates, a country that does not have extradition agreements with either Singapore or the United States."
"Voyager paused all trading and withdrawals on its platform on July 1, 2022. Four days later, the company filed for Chapter 11 in the United States Bankruptcy Court for the Southern District of New York." "Voyager Digital had suspended all withdrawals and trading last week but said “volatility and contagion” in the crypto markets had forced it into a Chapter 11 filing, which shields a business from creditors while it explores strategic alternatives."
“The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan from the company’s subsidiary, Voyager Digital LLC, require us to take deliberate and decisive action now,” Voyager’s chief executive, Stephen Ehrlich, said.
"Voyager Digital Holdings, Inc. and two affiliates filed for bankruptcy protection on July 5th with a proposed plan of reorganization in hand." "More than 3.5 million American customers have nearly $5 billion in frozen assets on the platform." "In its Chapter 11 bankruptcy filing, Voyager, based in New Jersey, estimated that it had more than 100,000 creditors and somewhere between $1bn and $10bn in assets, and liabilities worth the same value."
"Unlike 3AC’s filing, however, Voyager did so with a plan in hand, filing its proposed plan of reorganization shortly after filing its case. Generally, the plan provides that customers will receive (a) digital assets purchased by, or on behalf of customers and held by the company on the petition date (although it is unclear which or how many coins will be available for distribution), (b) stock in the reorganized Voyager, (c) existing tokens that had been issued by Voyager, and (d) recovery, if any, on account of the 3AC Loan (with the appointment of a litigation agent to pursue recovery). The plan allows some flexibility to exchange stock for coins. According to the plan, 100% of the new stock of a reorganized Voyager, subject to dilution for management, will be distributed to the customers. The company says that it will continue to market the business to third-party investors during the bankruptcy case with the hope of increasing value to its creditors."
"Voyager’s bankruptcy case will raise issues of first impression. For example, the plan does not appear to distinuish between the claims of those customers with digital assets earning “rewards” on the trading platform from those with assets purportedly maintained in custodial accounts. As discussed here, there may be arguments that assets held in custodial accounts are not properly property of the estate. The plan also treats the claims of account holders separately from those of general unsecured creditors who are entitled to a share of the “Claims Allocation Pool,” a term left undefined in the filed plan. The plan also treats customers differently than it does a claim on account of an unsecured loan from Alameda Ventures Ltd. (which is proposed to receive no recovery). As can be expected, the first plan of reorganization in a Chapter 11 of a cryptocurrency platform incorporates standard existing legal frameworks to address creditor recovery and rehabilitation of the estate, such as conversion to equity and use of litigation trusts. It will be interesting to see how these frameworks perform in the digital assets space. Other issues may arise if there continues to be volatility in the value of digital assets (if, for example, BTC is at $20,000 when the plan is solicited but later increases dramatically in value before voting or confirmation)."
"Voyager Digital CEO Stephen Ehrlich mentioned in July that he intended to return customer funds from MCB as soon as a “reconciliation and fraud prevention process” was completed, and the firm reportedly asked to have the funds in the MCB released on July 15." "The judge presiding over Voyager’s bankruptcy proceedings in New York cleared the company to return $270 million in customer funds held at the Metropolitan Commercial Bank. Withdrawals were set to begin in August 2022."
"Carol Alexander, professor of finance at the University of Sussex business school, said Voyager’s troubles were part of a crypto credit crisis, but argued that was “not a bad thing at this stage”."
“During the latest bitcoin bubble, firms offering unsustainable yields have proliferated too rapidly.” she said. “The shakedown we are witnessing now is welcomed by most authentic advocates of the digital asset ecosystem.”
"An Official Committee of Unsecured Creditors has been appointed, made up of 7 customers. The Official Committee is tasked with representing the interests of general unsecured creditors generally and its legal and financial professionals are paid by Voyager’s estate. The Official Committee will weigh in on the sale process and the proposed plan terms with the goal of maximizing recoveries to unsecured creditors. Voyager has also sought approval of the engagement of special counsel on behalf of a special committee of Voyager’s board. The special committee was established to investigate “historical transactions” relating to Voyager and “investigate any potential estate claims and causes of action against insiders” of Voyager, including with respect to the loan to Three Arrows Capital."
"In a Second Day Hearing Presentation on [August 4th, 2022], Voyager stated that it has received word from as many as 88 interested parties keen to bailout the company from its financial woes, adding it is in “active discussions” with over 20 potentially interested parties."
"One of the most high-profile bids came from Alameda and FTX in July." "FTX takes the form of an unlikely hero for Voyager users, putting the possibility of funds being returned to customers on the table."
"Alameda had proposed to buy all of Voyager’s assets and outstanding loans except the defaulted loan to Three Arrows Capital, then liquidate the assets and distribute funds in USD through the FTX US exchange."
"This was rejected by Voyager on July 25 on the grounds that it was not “value-maximizing” for its customers." "Voyager also filed a response to an unsolicited bid from AlamedaFTX, the holder of a $75 million claim against Voyager. In the response, Voyager disparaged the offer as “not value maximizing” and not consistent with the proposed bid procedures. They also took the opportunity to state their opinion that AlamedaFTX’s claim is subordinated to customers (rather than pari passu as suggested by AlamedaFTX). In another release, Voyager implied that the Voyager tokens have an aggregate value in excess of $100 million."
"Crypto exchange giant FTX [eventually] won the auction for the assets of bankrupt crypto lender Voyager Digital with a bid worth just over 1.42 billion." "The winning bid includes about $1.31B for the fair market value of Voyager's digital assets and an additional consideration estimated as providing approximately $111M of incremental value." "Voyager says that FTX US's trading platform will enable customers to trade and store cryptocurrency after the conclusion of the company's chapter 11 cases. The deal will be presented to a US bankruptcy court next month and the sale of the assets is still dependent on a vote by creditors."
"As part of a multi-step process, the Court approved Voyager’s entry into the asset purchase agreement between FTX US and Voyager. FTX US’s bid, valued at approximately $1.422 billion, is comprised of (i) the fair market value of all Voyager cryptocurrency at a to-be-determined future date prior to closing of the sale, which at current market prices as of September 26th is estimated to be $1.311 billion, plus (ii) additional consideration which is estimated to provide approximately $111 million of incremental value to creditors. Voyager’s claims against Three Arrows Capital will remain with the bankruptcy estate and any recovery on account of the 3AC claims will be available for additional distribution to Voyager creditors."
"Following approval of its entry into the agreement, Voyager will move forward with a customer vote on the broader Plan, through which the sale to FTX US will be implemented. The deadline to vote on the Plan is November 29. Because we believe the Plan, including the sale to FTX US, maximizes recoveries to Voyager’s creditors, we urge all customers and creditors to vote in favor of the Plan."
"Voyager successfully recalled loans from Alameda Research for 6,500 BTC and 50,000 ETH." "A court filing from [September 19th, 2022] shows Alameda, founded by FTX CEO Sam Bankman-Fried, will pay back 6,553.42 BTC ($125.4 million) and 51,204.38 ETH ($69.1 million) in principal and loan fees, on top of smaller sums in other tokens including dogecoin, USDC, luna classic, and Voyager’s native asset VGX." "The payments are due on Sept. 30 at 5 pm ET. Voyager [returned] the collateral for loans that Alameda had pledged in the amount of 4,650,000 FTX tokens ($110.1 million) and 63,750,000 serum tokens ($49.1 million)."
"The designated wallet addresses for the payoff amounts and the return of collateral were redacted in Alameda’s filing. Making Voyager’s wallet addresses public would affect its restructuring efforts by allowing open access to commercially sensitive financial information, the lender said."
"Nov. 11, 2022 /CNW/ - Voyager Digital Ltd. ("Voyager" or the "Company") (OTC Pink: VYGVQ) (FRA: UCD2) and the Voyager Official Committee of Unsecured Creditors (UCC), which represents the interests of the general unsecured creditors, today announce that the company is evaluating strategic options as a result of the Chapter 11 filing by FTX Group. The no-shop provisions of the Asset Purchase Agreement between Voyager and FTX US are no longer binding."
"For this reason, Voyager has reopened the bidding process for the company, and is in active discussions with alternative bidders. Voyager and the UCC are moving with all due care and deliberate speed to identify an alternative plan of reorganization consistent with the core objective throughout this process: maximizing the value returned to customers and other creditors."
"Following FTX’s announcement [on November 8th] to file for bankruptcy, Voyager said it had reopened the bidding process for the company, and is in active discussions with alternative bidders. Wave Financial and trading platform Cross Tower are reported to be in the running." "At this time, Voyager has no loans outstanding with any borrower."
Voyager Digital was a digital asset investment platform which allowed customers to deposit cryptocurrency and earn an annual return of up to 12%. In exchange for customers depositing over $5.9B USD in assets, Voyager Digital would lend the assets out to various firms, which largely included Three Arrows Capital (over 50% of the portfolio) and Alameda Research (over 30%). With the collapse of the UST/Terra stablecoin, which Three Arrows Capital was heavily invested in, they became unable to repay their debt and had to default. This placed Voyager Digital in a position of filing Chapter 11 bankruptcy and attempting to restructure the company.
A number of companies stepped forward to acquire Voyager Digital's remaining assets, including FTX US. However, FTX US has subsequently declared bankruptcy and Voyager is back to the table looking for other bidders to acquire the company.
HOW COULD THIS HAVE BEEN PREVENTED?
The primary reason for failure was the apparent lack of collateral on the loan provided to Three Arrows Capital. Had proper collateral been obtained, it could have been used to recover all or part of the balance after their default. Instead, when Three Arrows Capital went bankrupt, a large hole was left in the balance sheet of Voyager Digital. Investors were given very limited visibility into the level of risk that they were being exposed to in this case, which expanded the scale of the damages and caused large surprise when the loan was not repaid.
Billion Dollar Bankruptcy Gets WORSE - YouTube (Jul 16)
Trade 100+ crypto assets and earn earn annual rewards. (Nov 16)
Court Approves Voyager’s Entry into Asset Purchase Agreement with FTX US (Nov 16)
Voyager | Trade 60+ crypto assets and earn up to 10% interest APR (Nov 16)
Trade 100+ crypto assets and earn up to 12% rewards. (Nov 16)
Lawsuit Accuses Mark Cuban, Voyager Digital Of Defrauding Cryptocurrency Investors (Nov 17)
Voyager to return $270M in customer funds, says it received 'better' offers than FTX (Nov 17)
Voyager Digital (TSXV:VOYG) reports record-breaking quarter – The Market Herald (Nov 17)
Cryptocurrency broker Voyager Digital files for bankruptcy protection | Cryptocurrencies | The Guardian (Nov 17)
Voyager Digital (TSX:VOYG) announces credit facility and potential default – The Market Herald (Nov 17)
FTX acquires Voyager Digital for basically $0 ; Metaverse gone wrong (Nov 17)
VOYG history — Timeline of major events — TradingView (Nov 17)
Voyager—Bankruptcy Timelines Begin to Slide | Virtual Currency Report (Nov 17)
US - Voyager Digital’s Bankruptcy Case: The First 3 Weeks. - Conventus Law (Nov 17)
Three Arrows Capital - Wikipedia (Nov 17)
Voyager Digital Issues Three Arrows Capital With Default Notice - Decrypt (Nov 17)
@zhusu Twitter (Nov 17)
Three Arrows Capital crypto hedge fund defaults on Voyager loan (Nov 17)
Voyager Digital Halts Trading and Withdrawals After Three Arrows Capital Default - Decrypt (Nov 17)
Voyager Delivers Painful Lesson on Perils of Counterparty Risk in Bankruptcy Drama - The Defiant (Nov 17)
Subscribe to read | Financial Times (Nov 17)
Cryptocurrency Hedge Fund Three Arrows Capital and Platform Voyager Digital Resort to Bankruptcy for Relief | Crypto Digest (Nov 17)
Voyager urges Alameda Research to repay $200M loan (Nov 17)
Sam Bankman-Fried's Alameda to Repay $200 Million Voyager Crypto Loan (Nov 17)
Alameda to Repay $200M Loan to Voyager as Asset Auction Nears - Blockworks (Nov 17)
Binance's US Arm to Relaunch Bid for Bankrupt Lender Voyager: Source (Nov 17)
Voyager | About (Nov 17)
Voyager | Terms Of Use (Nov 17)
