Voyager Digital Enters Bankruptcy After Three Arrows Meltdown

Crypto lender Voyager Digital Holdings filed for bankruptcy on Wednesday, as its exposure to beleaguered hedge fund Three Arrows Capital devastated its finances.

The lender filed for Chapter 11 bankruptcy in the Southern District of New York, according to a court filing.

The firm’s estimated assets are over $1 billion, and it has more than 100,000 creditors. The move comes shortly after the crypto lender suspended withdrawals on its its platform.

Voyager had a massive exposure to Three Arrows Capital, which is also in the process of negotiating a bankruptcy. Three Arrows had recently defaulted on a $660 million loan from Voyager, which is also likely behind the lender’s recent filing.

Voyager bankruptcy spells trouble for crypto

Bitcoin and Ethereum prices dropped in response to Voyager’s filing, with BTC falling back below $20,000. The filing likely spells more pressure on crypto markets, as a bulk of Voyager’s assets are now likely to be liquidated to repay its debtors.

Currently, it appears that  Alameda Research is Voyager’s biggest creditor, after the trading desk gave a $500 million credit line to the crypto lender. Voyager had taken about $75 million from the facility.

The bankruptcy also potentially places pressure on Alameda’s finances, which could in turn have a ripple effect across crypto markets. The broker was founded by FTX CEO Sam Bankman-Fried.

FTX has also attempted to rescue other beleaguered crypto firms, including BlockFi.

Crypto bear market logs more casualties

Voyager is only the latest casualty of the crypto bear market. In June, lender Celsius was the first to suspend withdrawals. This was followed by Three Arrows Capital and several other exchanges declaring a severe lack of funds.

This cascade of insolvencies comes as crypto markets logged an over 60% decline in value this year. This exposed several overleveraged players to margin calls, which they were unable to meet due to declining crypto prices.

Voyager, Three Arrows and BlockFi have received much flak over facilitating high-risk loans, with little scope of recovery amid the bear market.

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn’t trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns.
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