Voyager Digital news: the crypto broker has announced it’s filing for bankruptcy. Its customers are furious, and with good reason. The loss of their funds may be devastating. So what exactly happened? Was Voyager Digital’s failure inevitable, or was it avoidable? And what do you need to know if you’re an investor in crypto and looking to protect your assets? Here’s what we know about the news of Voyager Digital going bankrupt.
A brief history of Voyager Digital Ltd.
Voyager Digital Ltd. was a Canadian-based cryptocurrency brokerage and exchange platform that allowed users to buy, sell, and trade digital assets. The company was founded in 2018 and began operating in 2019. It was based out of Vancouver and had about 40 employees.
It offered trading for several major cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), and more. Its investors included Blockchain Capital, Bitmain Technologies, GSR Ventures, Plus500 Investments LTD., Scalar Capital Partners LLC., and Yahoo!. Voyager also functioned as a lender, offering crypto-backed loans. Unfortunately, that might have been one of the straws that tipped the exchange into bankruptcy.
What happened to Voyager?
In their filing for bankruptcy, Voyager Digital stated Three Arrows Capital (3AC) defaulted on a loan worth $650 million. Voyager claims the default by Three Arrows, which went bankrupt and liquidated its assets in late June, pushed them into insolvency. Notably, Three Arrows allegedly went under after investing in a risky DeFi token without informing loaners and investors. However, according to reports, it’s hard to blame Three Arrows Capital entirely when Voyager had $5.7 billion in liabilities in March.
Notable crypto proponent and FTX founder Sam Bankman-Fried (SBF) has been putting a lot of money into crypto. Not only is his exchange FTX one of the largest crypto platforms, but SBF has also spent billions in lobbying and investing in crypto exchanges.
News of Voyager Digital’s bankruptcy filing comes a few weeks after SBF stated many exchanges were probably already insolvent. For example, FTX is working to buy BlockFi, another crypto exchange that went under after Three Arrows defaulted on a loan. SBF had warned that many crypto exchanges would probably go under earlier in the year. SBF has also hinted that the Federal Reserve could be responsible for the current crypto woes.
How will this affect cryptocurrency?
At the time of publication, most crypto tokens appear to be hovering at relatively stable values. Of course, as with all things crypto, that might change at any moment. There’s the question of what will happen with Voyager Digital’s holdings after liquidating their funds. Voyager has already stated there’s a high likelihood that investors will lose some of their money. Reports suggest Voyager intends to pay investors back in a mix of cryptocurrency and shares of Voyager after it restructures under Chapter 11. Because of Three Arrow Capital’s outstanding debt to Voyager, the payout might include restructured 3AC shares as well.
Voyager used several wallets that functioned as a pool for holding assets like BTC and ETH. That practice seems to go directly against the principles of decentralized finance, where each user holds their assets in a personal wallet. Investors losing their crypto because a centralized exchange (Voyager Digital in this case) files for bankruptcy is what DeFi was supposed to prevent.
What should you do now?
Investors who had their crypto on Voyager’s platform will have to wait and see. First, Voyager will have to pay investors back, even if it’s not the total amount the exchange held for them. Beyond that, we might see a series of lawsuits against Voyager Digital, although these could take various forms. Finally, depending on the value of their assets at the time news broke of Voyager Digital Ltd. filing for bankruptcy, investors may have to go to small claims court or wait for a class-action lawsuit.
If you’re still holding crypto on a centralized exchange and want to avoid what Voyager Digital users are going through, you might want to consider moving your assets to a hardware wallet. Of course, you can continue to use your centralized exchange platform to buy or sell crypto, but transferring your assets to a cold wallet gives you complete control over them. That way, if your exchange should happen to go under, they won’t have any claim over your crypto.
