Sam Bankman-Fried’s FTX offers to restructure Voyager Digital’s assets

Cryptocurrency billionaire Sam Bankman-Fried made an offer to restructure Voyager Digital’s assets that will allow customers of the bankrupt crypto brokerage firm to recover a portion of their investments.

FTX Trading, along with its US subsidiary and Alameda Research, all majority-owned by Bankman-Fried, said the deal would provide Voyager customers an opportunity to get back at least some of their crypto holdings, according to an FTX announcement on 22 July

Under the proposal, Voyager customers would have the opportunity to start new accounts at FTX with an opening cash balance funded by distributions of an unspecified amount from the Voyager bankruptcy estate, according to the press release. Voyager customers can also immediately withdraw the cash from the new FTX accounts.

The group offered $15m in cash for Voyager customer information and an undisclosed amount for the assets that would be determined at the price two days before the closing, according to a 22 July letter from the buyers to Voyager attached to the announcement.

The prospective buyers didn’t disclose what portion of their assets participating customers would receive in the initial cash balance. FTX said Voyager would maintain the right to any recovery on a roughly $650m loan to Three Arrows Capital, the crypto hedge fund in liquidation, and use the funds for additional payouts to customers.

“The chapter 11 case exposes customers with unsecured claims to extended illiquidity and a substantial risk of further losses, without the right to the appreciation of the specific crypto assets in which they originally invested,” FTX’s lawyers said in the letter to Voyager.

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The buyers said they hoped to close the deal, which still needs to be accepted by Voyager and approved by the bankruptcy court, by early August.

Voyager filed court papers on 25 July saying that FTX’s proposal included misleading statements and amounted to liquidation on terms that benefit FTX but disadvantage Voyager’s customers.

“It’s a low-ball bid dressed up as a white knight rescue,” the company’s court filing said.

Voyager, founded in 2018, filed for bankruptcy on July 5 in the US Bankruptcy Court in New York after facing a “run on the bank,” flooded with customer requests for withdrawals. The company listed roughly $1.3bn of crypto assets on its platform as of July 8.

Voyager also said it had about $350m in a cash account held on behalf of Voyager’s customers at custodian bank Metropolitan Commercial Bank. The company last week asked the bankruptcy court to allow its customers to withdraw from the cash account.

FTX also said in the 22 July letter that it was willing to exclude the cash held in the Metropolitan bank account from the deal.

Customers of Voyager and bankrupt crypto lender Celsius Network have filed letters in bankruptcy court in recent days, hoping to retrieve their crypto assets. Some customers fear the value of their crypto assets may be frozen on the date of the chapter 11 filings, depriving them of any subsequent appreciation.

FTX has emerged as a buyer of last resort after $2tn was wiped out in crypto market value since November, pushing companies into bankruptcy and causing mass layoffs in the sector.

Bankman-Fried’s Alameda Research had extended a credit facility of $500m to Voyager before the firm filed for bankruptcy, of which $75m has been drawn down. As part of the proposed deal, Alameda said it would write off its own $75m loan claim.

Earlier this month, FTX struck a deal with BlockFi that included a $400m revolving credit facility and an option to buy the crypto lender for as much as $240m.

Write to Soma Biswas at [email protected]

This article was published by The Wall Street Journal

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