In an update posted Monday morning, Voyager – the crypto exchange platform that declared Chapter 11 bankruptcy last week – assured customers that its “FDIC insured” USD deposits would be returned in full, pending a “reconciliation and fraud prevention process.”
Crypto investments are a different story, and under the firm’s proposed restructuring plan, it remains unclear exactly how customers will be refunded for those assets held with the platform.
Voyager ran into trouble late last month thanks to a loan of about $650 million to Three Arrows Capital, or 3AC, a major crypto hedge fund that collapsed in June. According to a New York court filing, 3AC – which was forced to file for Chapter 7 bankruptcy last month in the British Virgin Islands – is not cooperating with liquidators.
Voyager since has been forced to suspend all trading, deposits and withdrawals, and file for Chapter 11 bankruptcy protection. In addition to crypto investments held on the platform, the withdrawal suspension affects all U.S. dollar deposits – even if those funds were never used to buy or sell crypto.
Per Voyager’s update on Monday, the firm “currently has approximately $1.3 billion of crypto assets on its platform, plus claims against Three Arrows Capital ('3AC') of more than $650 million (it fluctuates due to the exchange rate between bitcoin and USD).”
Customer refund process
Voyager, which is helmed by CEO Steve Ehrlich, explained how its reorganization plan, which it proposed in court last week, will affect depositors:
“Customers will receive a combination of the following, with the ability to select the proportion of crypto and common equity they receive, subject to certain maximum thresholds: pro-rata share of crypto; pro-rata share of proceeds from the 3AC recovery; pro-rata share of common shares in the newly reorganized company and pro-rata share of existing Voyager tokens.”
Voyager clarified in its update that the reorganization plan is still subject to change, and the exact amounts that customers receive will “depend on what happens in the restructuring process and the recovery of 3AC assets.”
Voyager’s update came after a report that the Federal Deposit Insurance Corporation launched a probe into the firm, surrounding its claim that customer USD deposits were “FDIC insured.”
In its marketing material, Voyager previously claimed that dollar deposits were FDIC-insured in the event of Voyager’s collapse – meaning users would be refunded up to $250,000 in the event of the exchange’s failure.
Customer dollars were actually on deposit with FDIC-insured Metropolitan Commercial Bank (MCB), meaning the insurance protected against a MCB failure, not a Voyager failure. Nevertheless, says Voyager, USD deposits are protected as the money is with MCB, not Voyager.
Voyager also said that it “worked with the FDIC in early 2021 and again in early 2022 to update and clarify the language on its website.”
“USD in your Voyager cash account is held at MCB and is FDIC insured," Voyager added. "That means you are covered in the event of MCB’s failure, up to a maximum of $250,000 per Voyager customer. FDIC insurance does not protect against the failure of Voyager, but to be clear: Voyager does not hold customer cash, that cash is held at MCB.”