Voyager Digital authorised to return $270m to customers

New York court approves return of $270m to customers of crypto lender Voyager Digital

Voyager stock jumps 75% on FTX sale expectation - Photo:Shutterstock

The US Bankruptcy Court in New York has given approval to Voyager Digital for the cryptocurrency lender to to return $270m (£224m) to customers affected by its collapse.

Presiding judge Michael Wiles approved the restoration of funds currently held in a custodial account at the Metropolitan Commercial Bank, reported The Wall Street Journal.

Voyager’s route to bankruptcy

Voyager Digital filed for Chapter 11 bankruptcy protection in July, after falling victim to the liquidity crisis in the cryptocurrency sector. 

A shift in macroeconomic sentiment towards higher interest rates and less speculative assets triggered a cycling out of cryptocurrency investment. This effect was compounded by a number of high-profile crypto projects collapsing, such as Terra LUNA. 

Three Arrows Capital, a Singapore-based hedge fund which had invested heavily in LUNA and had $10bn in assets under management as recently as April, eventually filed for insolvency as a result.

The hedge fund was unable to repay the $660m loan that Voyager Digital had given it. After the default, Voyager CEO Stephen Ehrlich sought assistance from the financial advisers Moelis & Company. 

After freezing withdrawals and receiving a line of credit from cryptocurrency billionaire Sam Bankman-Fried’s Alameda Research, Voyager eventually resigned itself to bankruptcy. The firm is also owed $17.5m from the cryptocurrency lender Genesis Global Capital and $34.4m from Mike Novogratz’s Galaxy Digital. 

Sale expected to conclude soon

Voyager is expected to conclude its sale process next month, with Bankman Fried’s FTX Trading expected to win out despite Voyager labelling the firm’s latest offer “a low-ball bid dressed up as a white knight rescue”. 

As of 5 August 2022, Voyager stock was trading earlier at $0.17, up 75% since the start of Thursday trading, boosted by the prospect of a finalised sale.

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