Voyager Digital has filed for Chapter 11 bankruptcy. What does this mean for Crypto customers?
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Trade of digital travel (OTCMKTS:VYGVF) the stock is currently arrested after the company announced that it will continue Chapter 11 Bankruptcy. The cryptocurrency brokerage firm also revealed that it has approximately $1.3 billion worth of crypto assets on its platform. In addition, he holds over $350 million in cash in his For the Benefit of Clients (FBO) account at Metropolitan Bank.
Last week, Voyager announced the suspension of all trades, withdrawals, deposits and loyalty rewards. The company also suspended its debit card and customers were told to suspend all direct deposits and automatic payments. Voyager awarded suspension due to losses suffered following fall of crypto hedge fund Capital of the Three Arrows (3AC). 3AC currently owes the crypto brokerage over $650 million due to default.
So the big question remains. What will happen to the client’s assets on the platform?
What Does Chapter 11 Bankruptcy Mean For Voyager Digital Crypto Clients?
Chapter 11 Bankruptcy allows the debtor, or Voyager, to remain in business while pursuing a debt reorganization plan. The plan must be in the best interest of the debtor’s creditors, as Alphabet (NASDAQ:GOOGNASDAQ:GOOGL) and FTX-supported Alameda Search. However, Voyager has already made a plan for what it intends to do with its clients’ assets.
Users who hold US dollars (USD) on the platform will be able to recover them after a “reconciliation and fraud prevention process” is completed with Metropolitan Bank. However, users who own crypto on the platform will face a longer process. In a press release outlining the plan, Voyager explains:
“…customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), 3AC recovery proceeds, common stock of the newly reorganized and Voyager tokens. The plan contemplates the ability for customers to choose the proportion of common stock and crypto they will receive, subject to certain maximum thresholds.
The company notes that the crypto recovery plan must be approved by the court before it can be enacted. Moreover, it is clear that Voyager does not have enough assets to return crypto investments to clients. This is why it chooses to bring them equity in the newly reorganized company.
Voyager said it continues to evaluate all strategic alternatives to maximize stakeholder value.
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At the date of publication, Eddie Pan did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.