Another day, another bankruptcy in the cryptocurrency sector as brokerage Voyager Digital (OTCMKTS:VYGVF) files for Chapter 11 protection from its creditors. VYGVF stock is dropping in response.
Voyager Digital, which is listed on the Toronto Stock Exchange in Canada and OTC Markets, has announced that it commenced bankruptcy proceedings bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of New York. The news is sending the share price of the cryptocurrency brokerage lower today. VYGVF stock has already fallen 98% this year to trade at 27 cents a share.
In its bankruptcy filing, Voyager Digital listed debts of between $1 billion and $10 billion, and said that it has $1.3 billion of cryptocurrencies remaining on its platform and $350 million of cash on hand. Last week, Voyager halted all withdrawals, deposits, and trading activity on its platform, citing “current market conditions.”
The situation at Voyager Digital deteriorated quickly in recent days after cryptocurrency hedge fund Three Arrows Capital, which fell into liquidation last week, defaulted on a $650 million loan payment it owed to Voyager.
On Twitter (NYSE:TWTR), Voyager chief executive officer (CEO) Stephen Ehrlich wrote: “We strongly believe in the future of the industry but the prolonged volatility in the crypto markets, and the default of Three Arrows Capital, require us to take this decisive action.”
Voyager said the bankruptcy proceedings will enable it to restructure so that customers can eventually be reimbursed their money.
Why It Matters
The entire cryptocurrency market is struggling with a serious liquidity crisis right now as lenders and exchanges fail to meet a stampede of withdrawals from customers who want to cash out their digital coins and tokens as prices continue to fall. Several other crypto firms, including Celsius, Babel Finance, and Vauld, have halted withdrawals in recent days.
The entire cryptocurrency market continues to selloff as investors dump riskier assets and move to safe havens as fears of a global recession intensify. Bitcoin (BTC-USD), the world’s biggest digital coin, suffered its worst month on record in June, dropping nearly 40% and falling below the key support level of $20,000. BTC-USD is currently trading at slightly above the $20,000 mark.
What’s Next for VYGVF Stock
Already down 98% this year, VYGVF stock is likely to fall even further today on news of the bankruptcy filing. It remains to be seen if Voyager Digital will emerge from its bankruptcy filing and restructuring and if customers will get their money back. The entire situation in the cryptocurrency sector is worsening and investors should be careful with digital coins and tokens.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Joel Baglole did not have (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.