Voyager Digital, a cryptocurrency brokerage firm based in New York, has declared bankruptcy. Voyager had between $1 and $10 billion in assets and over 100,000 creditors, according to its filing. Its liabilities were also in the $1 to $10 billion range. The company ceased trading and all platform transactions, including deposits and withdrawals, on Friday of last week. Over 100,000 investors’ money could be at risk as the company files for Chapter 11 bankruptcy protection in the United States. During a Chapter 11 bankruptcy, a corporation can continue operations while reorganizing its debts.
Voyager Digital’s downward spiral and what awaits investors
An official petition states that the company wants to develop a financial strategy that can help it deal with debt and creditors and restructure its business. Clients with cryptocurrency in their accounts will receive a combination of cryptocurrency and common shares in the newly reformed company. According to Voyager, a Singapore-based hedge fund, Three Arrows Capital (3AC) has defaulted on a debt of 15,250 BTC and $350 million in USDC, stablecoins.
The crypto winter has taken its toll on a number of cryptocurrency firms and it is unlikely that Voyager Digital will be the last victim. Over the past month, plummeting crypto prices have seen Celsius Network, Three Arrows Capital, BlockFi and Vauld face financial meltdown. This has exposed the soft underbelly of the global digital assets market. As a result, cryptocurrency holders could lose billions of dollars in exchanges’ funds as withdrawals are halted.
The crypto market has already lost $2 trillion in the last seven months due to the current crypto winter. It’s even worse because the market is mostly unregulated. This means that many investors could lose all of their money without the government’s intervention. The European Union has recently passed the Markets in Crypto-Assets (MiCA) law to regulate the market. However that might have come too late for many investors.