Following in the footsteps of Three Arrows Capital (3AC), Voyager has filed for US bankruptcy protection. The digital asset lender has more than 100,000 creditors and billions of dollars in liabilities, US court filings show. Voyager is the latest victim to fall at the mercy of the steep drop in Cryptocurrency prices. This drop has sparked calamity and chaos in the digital asset market.
On July 5th 2022, Voyager filed for Chapter 11 bankruptcy in federal court in New York after incurring a loss of more than $650 million on a loan to 3AC, the failed Crypto hedge fund. Just last week, “due to market conditions”, Voyager was forced to suspend all trading, deposits, withdrawals and loyalty rewards. However, Voyager has completely collapsed now.
Voyager’s death will be felt more than other exchanges as the company had many do-it-yourself Crypto investors. Just a few months ago, its liabilities totalled to $5.7 billion dollars. By filing the Chapter 11 bankruptcy petition, Voyager is seeking protection from legal claims whilst it pursues a restructuring.
Voyagers restructuring plan is a process being put in place so that customers can be reimbursed. Subject to court approval, if all goes to plan, Voyager users will receive a combination of Crypto assets, proceeds from the recovery of funds from 3AC, shares of the new company and Voyager tokens if and when it comes out of insolvency.
Voyager also claims that it holds $350 million USD in cash deposits at the Metropolitan Commercial Bank in New York. It is thought that clients would be paid back after “a reconciliation and fraud prevention process”.
Chief Executive of Voyager, Stephen Ehrilich, said in the aftermath of the filing that, “we strongly believe in the future of the industry, but the prolonged volatility in the Crypto markets, and the default of Three Arrows Capital, requires us to take this decisive action”. Unfortunately, this brutal bear market triggered by a dire macroeconomic environment has been the kryptonite to many Web3 organizations. First, we witnessed the Terra Luna saga. Second, the breakdown of Celsius. Third, the death of Three Arrows Capital, and now this. The bear market is showing no sign of letting up anytime soon, nor does the macroeconomic situation look like it will improve in the near future. This begs the question, will other exchanges and lenders continue to be liquidated? Only time will tell.
So what is the take away from this? Well, the best thing we can do is learn to protect our assets properly. With all of these bankruptcies and halts in withdrawals happening from lenders and exchanges, it is crucial to know how to store your assets safely. The saying goes “not your keys, not your coins”. These institution breakdowns are only just beginning. Things are not looking good for centralized entities, as a lot of tier 2 and 3 exchanges will go insolvent. If your assets are stored on a central exchange, and it becomes insolvent, then you will lose them.
It cannot be stressed enough, if you are not using the funds for active trading, then the best place to store them is in a cold wallet such as a Ledger Nano X. It is the safest and most secure method, and you retain custody of the funds, which is very important. As we know, the name of the game in a bear market is to avoid insolvency. Protecting your capital is even more important than stacking capital. If you insist on trusting exchanges (not recommend), then please use the major ones like Binance or FTX. We’re in the midst of a brutal Crypto winter, so stay safe out there.