Crypto lender, Voyager Digital, recently gave its investors the green light to begin withdrawing funds, a decision that came almost a year after the lender had suspended withdrawals and filed for Chapter 11 bankruptcy.
The announcement took place last month, on June 23. And since the resumption of withdrawals, creditors have been in a race to withdraw their money from the Voyager Digital platform.
The withdrawals have resulted in an outflow of over $250 million worth of crypto assets from the Voyager Digital platform, according to the data from Dune Analytics.
The Connection Between Terra’s Collapse And Voyager
Following the collapse of the Terra ecosystem, Voyager Digital experienced a financial downfall, resulting in its declaration of bankruptcy. The implosion of the Terra ecosystem inflicted substantial damage on investors, eroding over $40 billion of their funds.
Due to widespread withdrawals, the crypto-lending firm encountered an acute liquidity crisis, ultimately leading to its unfortunate demise in bankruptcy.
After obtaining court approval on May 17, the bankruptcy plan was set in motion. According to the plan, customers will be entitled to receive 35.72% of their claims as an initial payout.
Undoubtedly, the task at hand may pose challenges, especially considering the impact of the crypto transition on institutions indebted to Voyager. For instance, Three Arrows Capital, with a debt of $650 million to Voyager, adds complexity to the situation.
Creditors have the flexibility to choose between withdrawing this amount in cryptocurrency via the Voyager app or receiving it in cash after a waiting period of 30 days.
In addition to the existing circumstances, there is a potential for an additional $445 million of customer funds to become available to creditors. However, this is contingent upon the resolution of Alameda Research’s preference claim against Voyager.
Unfortunately, it is anticipated that this resolution will not occur until at least mid-September 2023, further prolonging the process and adding uncertainty to the distribution of funds.
Despite already allowing withdrawals once more, the platform is actively engaged in asset recovery efforts, aiming to retrieve as much as possible in order to repay creditors. Given this, Voyager is not indefinitely accommodating the withdrawal period.
The platform currently holds $176 million worth of crypto assets, with a Clean Asset ratio of 96.15%. These assets include 2,287.4 BTC, 27,363.7 ETH, 18,558,340 USDC, 2.060 trillion SHIB, and more. BTC and ETH account for the majority, constituting 68% of the platform’s holdings.
Sky High Creditor’s Fee
A committee representing unsecured creditors has already been charged $5.17 million in legal fees for three months, by its law firm McDermott Will & Emery. The $5.17 million fee was charged during the third interim fee period extending from March 1, 2023, to May 18, 2023.
This proliferated the cost of the Voyager credit committee’s legal fees, bringing the total sum to approximately $16.5 million for the fee period running from July 22, 2022, to May 18, 2023.
The creditors are currently engaged in a lengthy and challenging process to recover their funds, which has encountered several obstacles along the way.
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Several months ago, Binance made a bid to acquire Voyager for a substantial amount of $1 billion. However, the US government, represented by agencies like the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), intervened and halted the deal. This action was primarily taken due to ongoing legal actions and concerns surrounding Binance.
