The Wall Street Journal reported that the United States Bankruptcy Court in New York had awarded the cryptocurrency brokerage Voyager Digital authority to repay $270 million to affected customers. The United States Bankruptcy Court gave the decision in New York.
On Thursday, the presiding judge Micheal Wiles gave Voyager the go-ahead to restore monies to consumers. These funds had been kept in a custodial account at the Metropolitan Commercial bank (MCB).
A bank run caused Voyager, a cryptocurrency company based in New Jersey, to be forced to suspend withdrawals and file for chapter 11 bankruptcy in July as cryptocurrency values continued their precipitous decline.
As a result of the shortage of liquidity, Voyager asked the court for authorization to comply with withdrawal requests made by customers for cash amounts that were being held in custody at the MCB.
Voyager has stated that the remaining money on the platform, which come to slightly over one billion dollars in total, belongs to the bankruptcy estate. This estate will be split among all of the creditors.
Voyager’s failure arises from the company’s exposure to the well-known cryptocurrency hedge fund Three Arrows Capital (3AC).
Unfolding Voyager’s financial commitments on its loans
Voyager provided 3AC with a loan of around $660 million; however, because the hedge fund had an exposure of $200 million to Terra, it defaulted on the loan and could not repay it.
The failure of 3AC to make payments forced Stephen Ehrlich, CEO of Voyager, to seek assistance from Moelis & Company as financial consultants.
Additional loan liabilities for Voyager include $34.4 million from Galaxy Digital, an investment firm owned by Mike Novogratz, and $17.5 million from Genesis Global Capital, a digital asset lender.
Galaxy Digital and Genesis Global Capital had exposure to 3AC and Terra in addition to their other investments.
After being exposed to Terra in May, Galaxy Digital announced a share repurchase scheme that would cost $10.6 million.
In a series of tweets, the chief executive officer of Michael Moro Genesis confessed that mortgages to Three Arrows used to have a weighted average margin call of more than 80 percent. However, he did not disclose the total amount of the loan.
It’s possible that the company’s excessive client awards were another factor contributing to Voyager’s bankruptcy.
After signing a contract with the Dallas Mavericks, the company gave crypto prizes worth $100, with annual rates ranging from 8% to 10% on more than 40 different assets.
Voyager anticipates that the selling process will be finalized in the month of September. At this time, FTX Trading will propose buying some of Voyager’s businesses and taking on some of Voyager’s clients.
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