Crypto Broker Voyager Digital’s Failure to Start Reimbursing Frozen Funds to Clients

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(Bloomberg) – Failed cryptocurrency brokerage Voyager Digital Holdings Inc. has won court approval to begin winding down its operations and begin paying customers back some of their crypto that is held on its platform since last year.

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Judge Michael Wiles approved liquidation proceedings for Voyagers on Wednesday, about a month after Binance.US ended an agreement to buy the crypto platform and after an agreement to sell to FTX the last year collapsed. Voyager customers will receive about 36% of what is owed to them, but their recovery could increase if the company is successful in an ongoing dispute with FTX, according to court documents.

No one is happy with the liquidation, Judge Wiles said, addressing Voyager clients who have complained about his oversight of the case, the cost of bankruptcy, the amount paid to lawyers and the fact that the users only get a percentage of their crypto back.

But the downturn is Voyager’s path because the company doesn’t have enough to provide full refunds to customers, Judge Wiles said. Options that might have led to a better recovery, namely selling the company to FTX or Binance, did not work out, he said. Voyager didn’t realize when he tried to sell himself to FTX that the Sam Bankman-Frieds company would turn out to be a gigantic fraud, the judge said.

20/20 retrospective, Judge Wiles said. I’m sure everyone wishes something better had happened.

We are where we are, try to do our best with where we are, Judge said.

FTX collapsed in November and Bankman-Fried pleaded not guilty to fraud charges.

Voyager has about $630 million to pay around $1.8 billion in customer claims, according to a May 5 court filing. Customers have the option of taking their refund in crypto or US dollars.

The story continues

Voyager was founded in 2018 and has grown rapidly, reaching a peak of 3.5 million users and some $6 billion in cryptocurrency assets, according to court records. The company had significant exposure to crypto hedge fund Three Arrows Capital Ltd. and filed for Chapter 11 in July, shortly after a court in the British Virgin Islands ordered Three Arrows to be wound up.

Bankruptcy is Voyager Digital Holdings Inc., 22-10943, US Bankruptcy Court for the Southern District of New York (Manhattan)

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