Recently, Voyager Digital filed for Chapter 11 bankruptcy after losing a lot of money in the demise of a hedge fund to which it had made big loans.
This Offer is Rare
Clients of the defunct crypto lender Voyager Digital are likely to find the proposal an emotionally satisfying one.
After the crypto lender that had been harmed by the default of hedge fund Three Arrows Capital or 3AC, on a loan filed for Chapter 11 bankruptcy at the beginning of the month, the latter had given up hope of recovering their assets/funds.
Voyager Digital’s filings indicate that small investors are not among the company’s top tier of secured creditors. A lack of certainty in the return of their funds is indicative of the unsecured nature of their claims.
But now something strange has happened. Sam Bankman-Fried, the young crypto billionaire behind FTX.com, has proposed a reorganisation proposal to help Voyager Digital consumers recoup some of their lost assets. This plan has appeal because it will entice both sets of customers to visit FTX.com simultaneously.
Get Early Entry to Voyager’s Liquidity
There are two elements to the offer. All of Voyager Digital’s assets, minus the loans made to the defunct hedge fund 3AC, would be purchased in cash by Alameda, a trading firm owned by Bankman-Fried.
In a recent press release, FTX explains how the joint proposal would benefit Voyager customers. “Under the joint proposal, customers of Voyager would have the opportunity to start a new account with FTX with an opening cash balance funded by an early distribution on a portion of their bankruptcy claims,” FTX writes.
“Users of the FTX platform could either make instant withdrawals or invest in digital assets. Customers are under no obligation to join the joint proposal, and doing so is entirely optional “, the company expands.
Before Voyager Digital filed for bankruptcy, Alameda extended the company a $75 million line of credit. As part of the new offer, Alameda will erase this claim.
It’s a sort of win-win formula because the offer gives a positive and savior image to Bankman-Fried and FTX, which will also allow it to win new customers. The offer is also an ideal ad for FTX at a time when mistrust of the cryptocurrency industry returns. They’ll get the “good guys” label, for once.
Bankman-Fried Power Continues to Grow
“Voyager’s customers did not choose to be bankruptcy investors holding unsecured claims,” says Sam Bankman-Fried, CEO of FTX. “The goal of our joint proposal is to help establish a better way to resolve an insolvent crypto business – a way that allows customers to obtain early liquidity and reclaim a portion of their assets without forcing them to speculate on bankruptcy outcomes and take one-sided risks.”
Since the beginning of the liquidity crisis that the crypto industry is currently going through, Bankman-Fried has established itself as the new savior, much like JPMorgan Chase bank at the time of the financial crisis of 2008. It has thus extended its power by bailing out crypto lender BlockFi, which gave it an option to acquire the platform. FTX is in talks to buy Bithumb, a South Korean crypto exchange.
Bankman-Fried also became one of Robinhood’s largest shareholders. And the young 30-year-old billionaire does not intend to stop there. He wants to continue to extend his power over an industry that nevertheless likes to present itself as decentralized in opposition to the traditional financial system.
“We could certainly see ourselves spending some number of hundreds of millions beyond what we have thus far, and in some cases more than that,” Bankman-Fried told CNBC on July 22.