Crypto firm Voyager accuses FTX of derailing bankruptcy process

Diving brief:

  • Crypto brokerage Voyager Digital accuses billionaire Sam banker-Fried to reverse its bankruptcy process by offering to give Voyager customers advance cash, according to court documents filed Sunday.
  • According to a proposal on Friday, the banker-Fried-owned trading firm Alameda Research would purchase all of Voyager’s digital assets and digital asset loans, except loans to hedge fund Three Arrows Capital, in cash at market value. Voyager customers could then open an account with FTX– exchange banker-Fried also owns – with money from “a portion of their bankruptcy claims”.
  • In bankruptcy proceedings this month, Voyager submitted a reorganization plan to the court and, at the same time, “engaged with more than 80 third-party investors or buyers” over a sale of company or its assets. Voyager has proposed a deadline for bids of August 26, with an auction set for August 29, the Financial Times reported on Monday. However, by making their offer public, FTX and Alameda are effectively “chilling” bids on what was once a confidential process, Voyager said.

Overview of the dive:

“Voyager will accept any serious proposal” related to the bidding process, the company wrote to the court, but Alameda and FTX’s bid “was designed to generate publicity for itself rather than value for Voyager’s customers”.

In its court filing, Voyager specifically challenges the currency conversion inherent in the Alameda and FTX proposal. Bankman-Fried-owned businesses would hold the cryptocurrency retrieved from Voyager and pass the cash value to customers migrating to FTX. This robs customers of the ability to accrue future value in crypto – but specifically Voyager’s VGX token, Voyager said.

Alameda/FTX proposal “would effectively eliminate the VGX token [and] immediately destroy over $100 million in value,” Voyager said, adding that the proposal “declares that there is no value in the Voyager platform and intellectual property.”

Beyond that, however, the proposal would leave migrant customers on the hook for capital gains and other cash conversion-related taxes, further diluting customer recovery.

“No customer will be cured” under the Alameda/FTX proposal, Voyager wrote in bold, pointing to the language used by FTX and Alameda in their press release – specifically, that customer FTX balances would come from “ part of their bankruptcy applications”. .”

“The AlamedaFTX proposal is nothing more than a cryptocurrency liquidation on a basis that benefits AlamedaFTX,” Voyager wrote. “It’s a low offer disguised as a white knight rescue.”

Bankman-Fried, in an emailed response to Bloomberg, called his companies’ proposal “generous,” adding, “It appears the Voyager consultants are trying to delay the process, increasing their fees.”

“Ultimately, we believe Voyager customers should have the right to quickly claim their remaining assets if they choose,” Bankman-Fried wrote in a statement seen by the Financial Times. “They’ve been through enough already.”

Bankman-Fried also stressed that offering its companies to Voyager customers would be voluntary.

“Clients are not required to register with FTX,” he wrote. “Any client who does not wish to … would continue to retain all of their rights and claims in the bankruptcy proceedings, but would not have early access to a distribution on their claim through FTX.”

As for Voyager’s claim that FTX’s offer excludes takers from a rebound in VGX’s value, Bankman-Fried wrote, “Even clients who want to go ‘long’ cryptocurrency shouldn’t be forced to do so by holding unsecured debts in a bankrupt company, at least not when there is a possibility of receiving money immediately.

Voyager owed $1.1 billion in total loan obligations, he said in court papers, including $654 million from Three Arrows, which itself went bankrupt on crypto bets tied to the collapses of TerraUSD and Luna.

Alameda is Voyager’s second largest borrower – after Three Arrows – with loans worth $377 million in cryptocurrency. Alameda also loaned Voyager $75 million when it was struggling. Alameda said it would cancel that loan as part of its proposal.

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