The crypto winter’s cold winds keep blowing. Voyager Digital, a company that lent cryptocurrency, filed for bankruptcy on Tuesday. That makes it the latest crypto company to fail since the market started falling in April. Voyager Digital is a platform for buying, selling, and lending. The estimated financial assets of Voyager Digital are between $1 billion and $10 billion.
Stephen Ehrlich, the CEO of Voyager Digital, said in the filing that there were two problems that led to the company’s dire financial situation. First, high inflation and rising interest rates have caused the prices of cryptocurrencies to drop. Bitcoin, for example, was down 60% from its all-time high in 2021. Second, the crypto hedge fund Three Arrows Capital didn’t pay back a $650 million loan that Voyager gave it in March.
Chain Reaction of Bad News
It’s an example of how bad news spread has hurt crypto over the past few months. The chain reaction Astarted with Luna. A cryptocurrency that crashed in May after the TerraUSD stablecoin that it was tied to lost its value. This crash wiped out about $14 billion from the market, costing companies holding TerraUSD and Luna a lot of money. One of these companies is Three Arrows Capital in Singapore. Last week, the hedge fund filed for Chapter 15 bankruptcy. This was just a few days after Voyager Digital sent 3AC a notice of default on the $650 million it had loaned 3AC.
In the past few weeks, a Peter Thiel-backed crypto lender Vauld stop withdrawals. Moreover, the bankruptcy of 3AC cost crypto broker Genesis hundreds of millions of dollars. A Korean investment fund apparently lost 99 percent of its customers’ funds because Luna went bankrupt.
Fortune said in March that Three Arrows Capital managed a fund worth about $10 billion. When asked for a comment, Three Arrows Capital didn’t answer right away.
Hoping for a Turnaround
While the court is liquidating 3AC, Voyager Digital’s leaders hope that filing for bankruptcy is the first step toward a turnaround. Chapter 11 bankruptcy lets companies plan for reorganizations and turnarounds while keeping them safe from civil lawsuits. New Jersey was the place Voyager Digital was located and its stocks were traded on the Toronto Stock Exchange before the bankruptcy filing stopped selling.
“This is not a ‘free-fall’ filing without direction,” the filing reads. “On the contrary, Voyager has a path forward and a plan to swiftly bring these chapter 11 cases to an appropriate conclusion.” Ehrlich has proposed a plan that, if approved by the court, would give Voyager customers with crypto in their wallets money from 3AC’s recovery, shares in the reorganized Voyager Digital company, and Voyager crypto tokens.
Voyager Digital filed for bankruptcy just days after stopping withdrawals and trading on its platform.