Voyager Digital, a major cryptocurrency investment firm, declared bankruptcy on July 6 after crypto hedge fund Three Arrow Capital (3AC) defaulted on a US$650 million loan.
Voyager Digital is a crypto lender that has multiple services, such as cryptocurrency or fiat currency deposits that provide high interest rates and loans.
However, recent slumps in the crypto market have caused instability in the sector. Large funds like 3AC have filed for bankruptcy and defaulted on their loans, including the $650 million loan from Voyager.
The loan was worth around 75% of Voyager's total assets, forcing the company to eventually file for bankruptcy.
Voyager's documents indicate its bankruptcy plans involve having "account holders" be "impaired". In other words, the company will not return all of its users' deposited cryptocurrency.
Rather, Voyager plans to compensate users with an assortment of assets, including a portion of their cryptocurrency, stocks in the company when it is reorganised, Voyager tokens or the company's own cryptocurrency, and money from 3AC.
The Voyager token has fallen to 0.2 cents, down 40% in the last week alone. In August 2021, the cryptocurrency was trading for $6.30.
On the other hand, customers who deposited dollars will be able to reclaim their money after the company finishes legal processing with Metropolitan Commercial Bank.
In the bankruptcy filing, Voyager stated 3AC took the largest loan from the firm, but added Voyager lent money to multiple third parties, including $376.8 million to crypto trading firm Alameda Research Ltd and $34.4 million to financial services company Galaxy Digital LLC.
Stephen Ehrlich, chief executive of Voyager, vowed the company will continue to operate despite the bankruptcy.
"Today we began a voluntary financial restructuring process to protect assets on the platform, maximise value for all stakeholders, especially customers, and emerge as a stronger company," he said on Twitter.