On Tuesday July 5th, 2022 Voyager Digital announced how the company would attempt to make their retail creditors whole again after lending to Three Arrows Capital (3AC). 3AC is a crypto fund giant that blew up about $18 billion at its peak, borrowing from CeFi lenders like Celsius, BlockFi, and Voyager. 

In the announcement, many investors (or creditors) found out how Voyager would try and repay the loans retail had made while expecting a fixed yield. Investors not only did not receive yield, but they also lost access to their initial deposits. 

In the announcement Voyager detailed its balance sheet woes:

The Company has over $110 million of cash and owned crypto assets on hand, which will provide liquidity to support day-to-day operations during the Chapter 11 process, in addition to more than $350 million of cash held in the For Benefit of Customers (FBO) account at Metropolitan Commercial Bank. Voyager also has approximately $1.3 billion of crypto assets on its platform, plus claims against Three Arrows Capital ("3AC") of more than $650 million.

What does this mean for retail? In order for everyone to get paid back in kind, customers have to hold out hope that 3AC miraculously pays back its $650M loan to Voyager. 

In more practical terms, this likely will not happen. So, Voyager does not have the funds to pay everyone back. Instead, retail investors who trusted Voyager with their assets will be given a “claim” against 3AC for the difference between what they put in and how much they got back from Voyager.  

On July 11th, Voyager doubled down on their previous announcement while also adding some new information. “Under the proposed reorganization plan, customers with crypto in their accounts will receive a combination of the following: Pro-rata share of crypto, pro-rata share of proceeds from the 3AC recovery, pro-rata share of common shares in the newly reorganized Company, and pro-rata share of Voyager tokens.”

This clause is a new addition to their settlement plans with their customers. The plan would be the equivalent of depositing 1 BTC and then receiving 0.25 BTC, 0.25 BTC claims against 3AC, 0.25 BTC value in common stock in Voyager, and 0.25 BTC in Voyager token value.

This was not received well by Voyager customers as they express their unhappiness under Voyager’s main thread. 

Suggesting an acquisition would make more investors whole in kind, rather than varying assets that the original investors might not care for

Voyager and Other CeFi Companies Reeling from 3AC Collapse

  • CeFi (centralized finance) continues to try and clean up the mess they created by chasing yield in order to support its difficult to sustain business model. 
  • As Voyager’s plans develop, Celsius is being sued by KeyFi in the New York Supreme Court with claims of being a ponzi scheme
  • The aftershocks of the fall of crypto’s biggest hedge fund (3AC) continues to be felt by retail, who once again are being “left to hold the bag.” 

The business model of providing fixed yield in a volatile space led to unsavory and mismanagement throughout the crypto space. Customer funds were used to chase yield in any form, regardless of risk, even buying their own token with customer funds to artificially inflate the price in order to borrow against it.

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