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UPDATE: What the Voyager Digital Bankruptcy Means for Your Cash and Crypto

  • Voyager (VYGVF) recently provided an update on what will happen to its customers' cash and crypto.
  • The platform paused all withdrawals, deposits and rewards on July 1.
  • On July 6, Voyager filed for Chapter 11 bankruptcy.
Voyager Digital bankruptcy - UPDATE: What the Voyager Digital Bankruptcy Means for Your Cash and Crypto

Source: T. Schneider / Shutterstock.com

Voyager (OTCMKTS:VYGVF) is once again in the spotlight after the company released an update on customers’ assets stored on its platform. This is the latest news in the saga since the Voyager Digital bankruptcy filing on July 6.

Users have been stuck in a state of uncertainty ever since Voyager paused all withdrawals, deposits and rewards on July 1. When the crypto lender announced it would pursue Chapter 11 bankruptcy, it blamed the filing on the downfall of crypto hedge fund Three Arrows Capital (3AC). Voyager had lent 3AC $650 million before the hedge fund announced it was insolvent.

Another controversial topic is if U.S. dollars (USD) on the platform are backed by the Federal Deposit Insurance Corporation (FDIC). The FDIC is currently looking into how Voyager marketed itself to customers about deposit insurance.

Still, it appears Voyager customers will be able to get their USD back, as evidenced by the latest company update. Let’s get into the details.

What the Voyager Digital Bankruptcy Means for Your Cash and Crypto

The update explains Voyager holds USD in a For Benefit of Customers (FBO) account at Metropolitan Bank (NYSE:MCB). The amount of USD in customers’ accounts is equal to the amount of USD held by Voyager in its FBO account. As a result, customers’ USD is FDIC-insured and will be accessible “after a reconciliation and fraud prevention process.” Voyager emphasized:

“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.”

While it appears the FDIC insures Voyager’s USD, the platform’s crypto holdings are a different story. Voyager currently holds about $1.3 billion of crypto assets. Under the terms of the Chapter 11 reorganization plan, customers will receive a combination of crypto and equity in return for their existing holdings. Customers will be able to select the proportion of crypto and common equity they receive.

The crypto returned includes the existing crypto and Voyager tokens. Furthermore, customers will also receive proceeds recovered from 3AC and common shares of the newly reorganized company. Voyager notes the proposed plan is still subject to change.

In the meantime, Voyager is pursuing other strategic alternatives. The company also confirmed the possibility of a “third-party investment or sale.”

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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.


Article printed from InvestorPlace Media, https://investorplace.com/2022/07/update-what-the-voyager-digital-bankruptcy-means-for-your-cash-and-crypto/.

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