Bankruptcy

Voyager Digital reportedly had deep ties with SBF-owned Alameda Research

Financial documents of Voyager revealed that they lent nearly $1.6 billion in crypto loans to an entity registered in the British Virgin Islands, the same place Alameda is registered.

Voyager Digital, the crypto lending firm that went bust due to the crypto contagion initiated by Three Arrow Capital’s (3AC) insolvency is currently fighting its bankruptcy court battle. The court proceedings and financial documents have shown a deep relation between the crypto lending firm and the Sam Bankman Fried-owned Alameda Research.

Alameda is a quantitative trading firm that was also one of many borrowers from Voyager and reportedly owed $370 million. However, within weeks of 3AC’s downfall, Alameda moved from a borrower to a lender and offered a $500 million bailout in late June.

SBF took to Twitter to give insights on the bailout deal that eventually became the point of conflict for Voyager. The troubled lender’s legal team claimed that the CEO was trying to create leverage for the trade.

Legal documents and financial papers point toward the ties between the two companies as early as September 2021. The same documents also indicate that Alameda borrowed much more initially than the current amount of $370M. Voyager’s financial books indicate that it lent out $1.6 billion in crypto loans to an entity based in the British Virgin Islands, the same place where Alameda is registered.

Related:  Voyager can’t guarantee all customers will receive their crypto under proposed recovery plan

The legal documents that verify Voyager’s loan to 3AC also show a “Counterparty A” registered in the British Virgin Islands, owing them $376.784 million. In its bankruptcy presentation, Voyager has shown Alameda owes them $377 million.

Alameda was also the biggest stakeholder in Voyager, with an 11.56% stake in the company acquired through two investments for a combined total of $110 million. When it completed the $500 million bailout, its investment was worth $17 million. Earlier this year, Alameda surrendered 4.5 million shares to avoid reporting requirements, bringing its equity down to 9.49%.

Voyager CEO Stephen Ehrlich said that after the bankruptcy court proceedings, many crypto holders on the platform would be potentially eligible to get back some of their assets along with common shares in the reorganized Voyager, Voyager tokens and proceeds from the now-defunct loan to 3AC.

The crypto contagion began with the now-defunct Terra stablecoin called TerraUSD (UST), which eventually led to the downfall of the $40 billion ecosystem. Many crypto hedge funds and lending firms exposed to Terra lost millions of dollars, which later led to the insolvency of 3AC, followed by the downfall of crypto leaders such as Celsius, BlockFi, Hodlnaut and Voyager.

Voyager plans to resume cash withdrawals on Aug. 11

The lending firm said clients with U.S. dollars in their accounts could withdraw up to $100,000 in a 24-hour period, with the funds received in 5–10 business days.

Crypto lender Voyager Digital Holdings has reported users may be able to make cash withdrawals from the app more than a month after suspending trading, deposits, withdrawals and loyalty rewards.

In a Friday blog post, Voyager said clients with U.S. dollars in their accounts could withdraw up to $100,000 in a 24-hour period starting as early as Aug. 11, with the funds received in 5–10 business days. The announcement followed a judge ruling on Thursday the crypto lending firm was cleared to return $270 million in customer funds held at the Metropolitan Commercial Bank in New York.

“Requests will be processed as quickly as possible but will require some manual review, including fraud reviews and account reconciliation, and timing will depend, in part, upon the individual banks to which customers transfer their cash,” said Voyager.

Voyager announced in June that it had entered into a $500 million loan agreement with trading firm Alameda Research due to losses from its exposure to Three Arrows Capital, which has also reportedly been ordered liquidated by a British Virgin Islands court. The crypto lending firm filed for bankruptcy under Chapter 11 in the Southern District Court of New York on July 5, saying at the time the move was part of a reorganization plan that would eventually allow users access to their accounts again. 

Related: Voyager can’t guarantee all customers will receive their crypto under proposed recovery plan

Though Voyager previously rejected a buyout bid from Alameda and FTX in July — saying it was not “value-maximizing” for its customers — the firm said on Friday it was still considering a potential sale of the company. Following the court approving bidding procedures, Voyager said bids will be due by Aug. 26 with a hearing on the potential sale expected on Sept. 8.

Zipmex gradually resuming Z Wallet withdrawals, says debt moratorium is not bankruptcy

The Asian cryptocurrency exchange was impacted by the Celsius and Babel Finance defaults but is working with investors to resolve the situation.

Crypto exchange Zipmex, which operates in Thailand, Indonesia, Singapore and Australia, released a statement this week denying reports that it has filed for bankruptcy and announcing its progress in resuming withdrawals from its Z Wallets. 

Zipmex customers can withdraw Solana (SOL) from their wallets Tuesday and will be able to withdraw XRP on Thursday and Cardano (ADA) on August 9, the company said.

Zipmex provides its customers with two wallets: the Z Wallet, used for Zipmex services and receipt of earnings and bonuses, and the Trade Wallet, where fiat currency and funds for trading are held. Zipmex paused all withdrawals from its platform on July 20 but resumed withdrawals from Trade Wallets two days later. The company cited its exposure to Babel Finance and Celsius defaults as necessitating the wallet freeze. Babel Finance owed Zipmex $48 million and Celsius owed it $5 million.

Now altcoins in Z Wallets will be transferred to Trade Wallets, leaving only Bitcoin (BTC), Ether (ETH) and stablecoins frozen in Z Wallets. Zipmex promised customers that it would “start to release some of these tokens [BTC, ETH and stablecoins] into your Trade Wallet starting in the middle of August.”

Related: Thai SEC launches digital hotline for Zipmex users

Zipmex also took the opportunity to clarify its recent legal actions, informing the public that it filed an application for a moratorium on debt in Singapore. As part of that process, Zipmex creditors will be able to file documents with the court through Aug. 5, with Zipmex Singapore submitting its documents a week later so the court can begin deliberating on the moratorium on Aug. 15.

Zipmex added that it was working with Babel Finance on the return of Zipmex’s funds. It had also signed a “Memorandum Of Agreement (MOU) with two investors” and received an additional investment from a current shareholder. Its largest investor is Singaporean and U.S. venture capital firm B Capital, followed by the U.S. Jump Capital and Hong Kong’s Mindworks Ventures.

Fed demands Voyager remove ‘false’ claims deposits are FDIC insured

The Fed and FDIC allege that Voyager “made various representations online” that its funds were FDIC insured.

Crypto lender Voyager Digital has been directed to remove “false and misleading” statements that its user’s deposit accounts are FDIC insured.

In a joint letter written on Thursday by Seth Rosebrock and Jason Gonzalez, assistant general counsel at the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) to Voyager Digital, the authors said the representations “likely misled and were relied upon” by customers who placed funds with Voyager who now no longer have access to it:

“These representations are false and misleading and, based on the information we have to date, it appears that the representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.”

The Fed and FDIC allege that Voyager “made various representations online, including its website, mobile app, and social media accounts” which suggested it was:

“(1) Voyager itself is FDIC-insured; (2) customers who invested with the Voyager cryptocurrency platform would receive FDIC insurance coverage for all funds provided to, held by, on, or with Voyager; and (3) the FDIC would insure customers against the failure of Voyager itself.”

The letter additionally demanded that Voyager provide written confirmation of its compliance with the regulator’s requests within two business days, and provide a full listing of all statements regarding any reference to FDIC insurance within 10 days.

It also warned that even if Voyager met the demands outlined in the cease-and-desist letter, it won’t preclude the regulator from taking further action if deemed appropriate. 

Voyager’s website currently states that it has worked with the FDIC to update and clarify the language surrounding FDIC insurance on its website in early 2021 and early 2022.

Currently, the language surrounding FDIC insurance states that United States dollar in Voyager cash account is held at Metropolitan Commercial Bank (MCB) and is FDIC insured:

“FDIC insurance does not protect against the failure of Voyager, but to be clear: Voyager does not hold customer cash, that cash is held at MCB.”

Cointelegraph reached out to Voyager for comment but did not receive an immediate response by the time of publication.

Only July 6, Voyager Digital filed for bankruptcy, citing debts of up to $10 billion to roughly 100,000 creditors amid market turmoil initially caused by the collapse of the Terra ecosystem and subsequently worsened as Singaporean hedge fund Three Arrows Capital (3AC) defaulted on a $670 million loan on

After weeks of rumors, Thai crypto exchange Zipmex files for debt relief in Singapore

It appears the firm’s fortune took a turn to the worst via its exposure to troubled crypto lending service Babel Finance.

In a document dated Wednesday, July 27, Thai cryptocurrency exchange Zipmex said that its solicitors in Singapore, Morgan Lewis Stamford LLC, filed five moratorium applications, or legal authorization to debtors to postpone payment, under Section 64 of Singapore’s Insolvency, Restructuring and Dissolution Act 2018 on behalf of the company. Zipmex seeks to protect itself against third party actions, claims, and proceedings for a period of six months while the filing is active. The announcement came just one week after its CEO and co-founder Marcus Lim publicly denied the firm was facing financial troubles. Rumors have been circulating in the past month that the cryptocurrency exchange was insolvent after a proposed acquisition by Coinbase fell through. 

Additionally, Zipmex already filed for credit relief last Friday but did not disclose the act until Wednesday. All of its subsidiary entities, consisting of Zipmex Asia Pte Lt, Zipmex Pte Ltd, Zipmex Company Limited, PT Zipmex Exchange Indonesia and Zipmex Australia Pty Ltd, were included in the filing. Furthermore, Zipmex says that a case conference regarding the filing has been scheduled for 4 pm UTC Friday and that creditors had just until the deadline of 10 am Thursday to inform solicitors that they wished to attend.

It appears that Zipmex’s fortunes took a turn for the worst after the collapse of Hong Kong-based crypto lender Babel Finance. As told by Zipmex: 

“The moratoriums would give the Zipmex Group the breathing space and time it requires to explore options to resolve the liquidity situation (including to pursue the recovery against Babel Finance), and to formulate a restructuring plan and secure additional investment to secure the Zipmex Group’s operations moving forward.”

Zipmex claims that it’s in the advanced stages of securing new investments to relive its liquidity crisis. Currently, Thailand’s Securities and Exchange Commission is asking affected investors to register complaints against the firm on its official site. 

Editor’s Note: The article has been updated to reflect that Zipmex submitted moratorium application, but is not in the procedures of bankruptcy. 

FTX proposes a way to give Voyager Digital clients some of their digital assets back early

FTX is proposing to buy out all Voyager Digital digital assets and digital asset loans, except loans to Three Arrows Capital, which would remain Voyager Digital’s problem.

FTX and Alameda Ventures want to offer Voyager Digital customers a chance to start a new FTX account with an opening cash balance funded by an early distribution on a portion of their bankruptcy claims, FTX announced in a statement Friday. To accomplish this, Alameda Ventures said it would like to buy all Voyager digital assets and digital asset loans, with the exception of loans to Three Arrows Capital (3AC). 

A letter from an FTX and Alameda Ventures legal representative explained that Voyager Digital customers who did not choose to create an FTX account would retain their rights in the bankruptcy proceedings, but would not receive early reimbursement. Accepting the offer would protect Voyager Digital clients from the depreciation of the crypto assets they currently do not have access to, as reimbursement for their digital assets will be based on their value on July 5.

After setting up an FX account, Voyager Digital clients would be able to continue trading their crypto or cash out their accounts immediately. FTX co-founder and CEO Sam Bankman-Fried said:

“The goal of our joint proposal is to help establish a better way to resolve an insolvent crypto business — a way that allows customers to obtain early liquidity and reclaim a portion of their assets without forcing them to speculate on bankruptcy outcomes and take one-sided risks.”

In addition to buying Voyager Digital’s digital assets and digital asset loans at market value, FTX would acquire all its customer information for a payment of $15 million and receive trademarks and other intellectual property as well. FTX would also write off its $75 million loan claim against Voyager Digital.

Related: Voyager token skyrockets as VGX pump scheme touted

FTX is asking Voyager Digital to respond to the offer by Tuesday, with an eye to receiving expedited approval from the bankruptcy court and closing the deal by August 17. 3AC funds would still be liable to recovery by Voyager Digital, and its customers would receive separate reimbursement independently of their deals with FTX.

Crypto lender Vauld seeks protection against creditors: Report

The crypto exchange, which is backed by Peter Thiel and Coinbase, halted withdrawals in July following an apparent run on its assets.

Singapore crypto exchange Vauld Group is seeking a moratorium against its creditors — a move that would give the troubled lender more time to restructure its business after collapsing asset prices impacted its operations earlier this month.

Vauld filed an application in Singapore on July 8 seeking a moratorium order, The Wall Street Journal reported Wednesday. If granted, the moratorium would provide the distressed lender more time to seek out a proper restructuring plan.

The Journal said a Singaporean moratorium order is similar to Chapter 11 bankruptcy in the United States, although the moratorium helps the company avoid complete closure.

Vauld issued a statement on July 11 informing the public that it would pursue a moratorium order to give management “the breathing space it requires to prepare for the intended restructuring for the benefit of all stakeholders.” However, as the Journal reported, the moratorium application was filed three days prior.

Related: Source claims 3AC’s Deribit exposure is worth much less than reported

On July 4, Vauld suspended deposits, withdrawals and trading due to adverse market conditions, capping off a volatile three-week stretch where customers tried to withdraw nearly $198 million from the platform. Around the same time that Vauld was experiencing a run on assets, CEO Darshan Bathija announced that his company would be cutting 30% of its staff.

The collapse of the Terra ecosystem in May exposed the crypto industry’s over-leveraged players, resulting in the high-profile bankruptcies of Celsius Network, Voyager Digital and Three Arrows Capital. Several exchanges have temporarily suspended trading operations due to liquidity constraints.

Source claims 3AC’s Deribit exposure is worth much less than reported

The creditors of Three Arrows Capital may be left holding the bag, according to a source who claims the hedge fund’s exposure to Deribit is only worth $25 million.

Court documents that describe the insolvency of failed crypto hedge fund Three Arrows Capital, also known as 3AC, may be overestimating the value of the firm’s remaining assets — specifically, its exposure to crypto options exchange Deribit. 

In a 1,100-page affidavit composed by liquidator Russell Crumpler and filed in a British Virgin Islands court, 3AC was described as “insolvent” and in need of being completely “wound up” because “Its management cannot be trusted to retain any remaining assets for the benefit of creditors.” The documents also detailed 3AC’s remaining assets, which included shares of Grayscale Bitcoin Trust (GBTC), cryptocurrencies Bitcoin (BTC), Avalanche (AVAX) and Near (NEAR), and shares of Deribit. Liquidators want access to these assets in order to facilitate creditors’ claims, which are worth at least $2.8 billion.

According to the affidavit, the Deribit shares are believed to be worth $500 million, or half of 3AC’s remaining assets. However, a source with knowledge of the matter told Cointelegraph that the value of 3AC’s Deribit shares is closer to $25 million rather than $500 million, suggesting that creditors will be left holding the bag on their loans to the failed hedge fund.

According to the source, who chose to remain anonymous, the discrepancy between the two amounts is due to the type of exposure 3AC has to Deribit. They claim that 3AC does not directly own shares in Deribit but instead owns shares in a Singapore Special Purpose Vehicle (SPV) called 3AC QCP Deribit SPV. The largest shareholders of the SPV are 3AC and QCP Soteria Node, a holding company whose portfolio includes Algorand and PundiX, according to its website. The SPV’s directors include QCP Soteria Node founder Sherwin Lee, QCP Capital co-founder Darius Sit and Three Arrows Capital co-founder Su Zhu.

Related: Crypto Biz: 3AC’s founders are nowhere to be found

The source further explained that the SPV owns over 23% of Deribit, making it the largest external shareholder. Of that total, 3AC owns 16%, making it the largest shareholder in the SPV.

“The SPV shares are worth significantly less than direct Deribit shares due to several material encumbrances,” the source said, adding:

“The owner of the SPV shares cannot sell or transfer the underlying Deribit shares without unanimous consent […] This means that the owner of the shares will be stuck with the SPV. These are entrenched in SPV constitution.”

The source claimed that QCP Soteria Node also has certain contractual powers, including the right of first refusal and tag-along rights, on 3AC’s SPV shares based on a side letter agreement between the two parties.

Over the course of several years, 3AC had been selling portions of its 16% stake through “binding side letters to numerous parties who are now claiming that they have an ownership on the 3AC SPV shares,” they said. “There are at least four known parties who have these side letters and have put in their claims to ownership of the 3AC shares in the SPV. Some of them are on the liquidator’s official list of creditors.”

Related: Liquidators can subpoena 3AC founders despite ‘tricky issues’ with crypto assets

The source claimed that a “significant discount” would need to be placed on the value of their shares due to these underlying encumbrances:

“A significant discount needs to be placed on the value of the 3AC SPV shares because any buyer of these shares would be subject to these encumbrances and would have significant difficulty monetizing the shares in the future and would also have to deal with the entire SPV which has close to 30 members.”

Three Arrows Capital represents one of crypto’s most significant falls from grace. Once the most revered hedge fund in the industry, holding over $10 billion in assets under management, 3AC began to implode in the wake of the Terra ecosystem collapse. Among its missteps was placing a series of large directional bets on GBTC, LUNA (now LUNC) and Lido’s Staked ETH during the worst macroeconomic backdrop since the 2008 financial crisis. 

Cointelegraph attempted to reach out to Three Arrows Capital on the matter, but did not receive a response prior to publication.

Author Joseph Hall contributed to this story.

Crypto Biz: 3AC’s founders are nowhere to be found

Liquidators don’t know the whereabouts of Kyle Davies and Su Zhu. Meanwhile, Grayscale’s legal officer says the asset manager’s lawsuit against the SEC could take a while to play out.

In the world of crypto, there’s no such thing as “too big to fail.” Three Arrows Capital, once the most recognizable hedge fund in the industry, has essentially gone belly-up after its founders believed their own hype and decided to go full-degen mode during the worst macro climate of a generation. Since the proverbial shit hit the fan last month, founders Kyle Davies and Su Zhu have kept a very low profile. So low, in fact, that their whereabouts remain a mystery, according to court documents. 

This week’s Crypto Biz chronicles the latest developments surrounding Three Arrows Capital and explores Grayscale’s legal proceedings against the United States Securities and Exchange Commission (SEC).

Liquidators can subpoena 3AC founders despite ‘tricky issues’ with crypto assets

We may not know the whereabouts of Kyle Davies or Su Zhu, but that won’t stop liquidators from subpoenaing the founders of bankrupt Three Arrows Capital, also known as 3AC. Earlier this week, United States bankruptcy judge Martin Glenn issued an order giving 3AC liquidators permission to demand that the founders attend court. Apparently, Zhu and Davies haven’t been cooperating with their liquidators. Zhu broke his nearly one-month silence this week by alleging that the liquidators “baited” his firm. Whatever that means.

Grayscale legal officer says Bitcoin ETF litigation could take two years

Grayscale’s quest for a Bitcoin (BTC) exchange-traded fund (ETF) could get more complicated as the asset manager embarks on suing the SEC for denying its latest application. Specifically, Grayscale is trying to convert its GBTC product into an ETF, but securities regulators won’t let them because of “concerns” about manipulation in the spot BTC market. Craig Salm, Grayscale’s chief legal officer, said the litigation process could take up to two years before a resolution is reached. Who knows, by that time, the SEC may decide to waive its magic wand and approve another spot Bitcoin ETF.

Multicoin Capital raises $430M for new crypto startup fund

Crypto venture funding has slowed in recent months, but that hasn’t stopped major firms from continuing to raise serious capital. Prominent investor Multicoin Capital announced this week that it has launched a massive $430 million fund to bootstrap crypto and blockchain startups. The firm’s new “Venture Fund III” will allocate between $500,000 and $25 million to early-stage companies, with an increasing focus on decentralized autonomous organizations, the creator economy and consumer-facing products. 2022 is shaping up to be the biggest funding year ever for crypto.

Playboy to launch first ‘MetaMansion’ in The Sandbox

Iconic lifestyle brand Playboy is entering the Metaverse — and doing it tastefully, too. The company behind your dad’s favorite raunchy magazine has launched its first MetaMansion in The Sandbox, giving users access to a virtual version of the Playboy mansion. If you decide to pay a visit to the virtual property, you’ll be able to attend a host of gaming and social events and possibly collect nonfungible tokens (NFTs) in the future. Apparently, the MetaMansion builds on Playboy’s Rabbitar NFT project, which is comprised of 11,953 tokenized bunny avatars.

Don’t miss it! Why are crypto platforms going bankrupt?

The cryptocurrency market may never be the same after 2022 — and that could be a good thing or a bad thing. With companies like Voyager Digital, Three Arrows Capital and Celsius filing for bankruptcy, investors are worried about what comes next. Is your crypto safe being held on exchanges or lending platforms? In this week’s Market Report, I sat down with fellow analysts Jordan Finneseth, Marcel Pechman and Benton Yaun to discuss how the recent wave of bankruptcies will impact the market.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.

Voyager can’t guarantee all customers will receive their crypto under proposed recovery plan

The crypto lending firm said that the exact amount reimbursed to users will “depend on what happens in the restructuring process and the recovery of 3AC assets.”

Following Voyager Digital filing for bankruptcy on Tuesday, the crypto lending firm said its recovery plan was aimed at preserving customer assets but did not explicitly state it would be able to return all equivalent funds to affected users.

In a Monday blog, Voyager said it had roughly $1.3 billion in affected users’ funds in addition to $650 million of “claims against Three Arrows Capital” — referring to the 15,250 Bitcoin (BTC) and 350 million USD Coin (USDC) loan the firm failed to repay. According to Voyager’s proposed recovery plan — subject to approval from the courts — users may receive a combination of Voyager tokens, cryptocurrencies, “common shares in the newly reorganized company,” and funds from any proceedings with Three Arrows Capital, or 3AC.

“The exact numbers will depend on what happens in the restructuring process and the recovery of 3AC assets,” said the lending firm. “The plan is subject to change, negotiation with customers, and ultimately a vote […] We put together a restructuring plan that would preserve customer assets and provide the best opportunity to maximize value.”

In addition to crypto assets, Voyager said it was holding funds “equal to the amount of USD in customer accounts” in a special FDIC-insured account at the Metropolitan Commercial Bank of New York. FDIC protection guarantees up to $250,000 per customer should the bank fail — not the lending firm. Voyager added it was “working to restore access to USD deposits,” subject to a reconciliation and fraud prevention process.

Voyager issued a notice of default to 3AC on June 27, later citing the firm’s failure to pay as one of the reasons behind suspending trading, deposits, withdrawals and loyalty rewards. The lending firm also announced it had borrowed 15,000 BTC — roughly $500 million at the time — from Alameda Research, claiming the funds were aimed at covering losses due to 3AC.

Related: Investors lament potentially lost ‘millions’ on Voyager bankruptcy

In addition to the legal solutions Voyager is exploring with 3AC’s repayment, the company said it was “pursuing various strategic alternatives to evaluate the value of the standalone company compared with a third-party investment or sale.” Data from TradingView shows the company’s share price has fallen more than 98% since its yearly high of $20.35 in November 2021, reaching roughly $0.27 at the time of publication.