Voyager announced late Tuesday that it had filed for Chapter 11 bankruptcy in New York federal court. The company said prolonged volatility in the crypto markets and the default by Three Arrows Capital on a $666 million loan from Voyager required decisive action.
"This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers," Voyager CEO Stephen Ehrlich said in a statement.
Three Arrows, a crypto hedge fund also known as 3AC, has itself filed for bankruptcy after being ordered to liquidate by a court in the British Virgin Islands. Three Arrows had bet big on the Terra crypto ecosystem that collapsed in value in May when its stablecoin, UST, lost its peg to the dollar.
The bankruptcy for Voyager comes despite Alameda Research, a crypto company run by Sam Bankman-Fried, extending two credit lines to the crypto broker: one for about $200 million and the other for about 15,000 bitcoin.
Voyager has between $1 billion and $10 billion in both assets and liabilities and more than 100,000 creditors, it said in the bankruptcy filing.
In a Twitter thread explaining the company's restructuring plan, Ehrlich said customers with crypto in their Voyager accounts "will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized company, and Voyager tokens."
Customers with U.S. dollars in their account "will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank," an institution holding some customer funds for Voyager.
The plan is pending court approval, Ehrlich added.
"During the reorganization, we'll maintain operations," Ehrlich said. "We intend to certain customer programs without disruption. Trading, deposits, withdrawals and loyalty rewards on the Voyager platform remain temporarily suspended."