Will Domino Bankruptcy Become a Reality? Cryptocurrency Brokerage Voyager Files for Bankruptcy Protection

[Asia Economy New York=Special Correspondent Joselgina] Voyager Digital, a cryptocurrency brokerage and lending company, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code on the night of the 5th (local time) at the U.S. Southern District of New York Bankruptcy Court.

According to the Wall Street Journal (WSJ) and others on the 6th, Voyager stated in documents submitted to the court that it faced a 'bank run' as customer withdrawal demands surged.

Voyager's bankruptcy protection filing is a ripple effect caused by the cryptocurrency crash. The company had previously lent $650 million to the cryptocurrency hedge fund Three Arrows Capital (3AC), but 3AC recently declared bankruptcy in the British Virgin Islands court, leaving Voyager unable to recover the funds and facing a liquidity crisis. As a result, it temporarily suspended coin trading, withdrawals, and deposits starting from the 1st.

Voyager confirmed that it holds approximately $1.3 billion worth of cryptocurrency assets on its platform, $110 million in cash and cryptocurrency assets to support operations during the Chapter 11 process. It also explained that it holds $350 million in cash in a bank account in New York on behalf of its customers.

Stephen Ehrlich, Voyager's CEO, said on Twitter on the 6th, "Our belief in the future of this industry remains strong, but due to the continued volatility of the cryptocurrency market and 3AC's default, we have made this decision."

The cryptocurrency crash, which began this year with the collapse of the Korean coins TerraUSD and Luna, has now expanded into a domino liquidity crisis across the industry. 3AC, which was the direct trigger for Voyager's bankruptcy filing, is known to have suffered significant losses from the Terra and Luna crash.

Coin lending company Celsius also temporarily suspended customer withdrawals last month citing market conditions. Singapore-based cryptocurrency lending company Bold, invested in by Silicon Valley mogul Peter Thiel, recently halted withdrawals, trading, and deposits and announced a moratorium (debt payment deferral).