After being in the headlines for all the wrong reasons,
Voyager Digital finally has something to write home about. It has received bids from more than 80 interested parties ready to bailout the company, as per its Second Day Hearing Presentation on August 4.
More importantly, the Wall Street Journal also reported that the judge who is overseeing the proceedings has allowed the company to return $270 million of customer funds previously frozen in the Metropolitan Commercial Bank (MCB).
Voyager Digital is one of many firms struggling to keep their heads above water amidst a bitter crypto winter and broader market turmoil. The company was forced to file Chapter 11 bankruptcy last month, with crypto lender Celsius and digital asset exchange, Zipmex following suit shortly after.
Customers were left holding the bag after the firm froze withdrawals on July 1. A few days later, it commenced voluntary Chapter 11 bankruptcy proceedings, and investors were sceptical of ever getting their funds back.
As per its bankruptcy filing, Voyager is estimated to have more than 100,000 creditors, with debts of up to $10 billion.
Fortunately, Judge Wiles, presiding over Voyager's bankruptcy proceedings, ruled that the company provided a "sufficient basis" to support its claim that customers should be allowed access to the custodial account held at Metropolitan Commercial Bank (MCB).
This account is said to contain $270 million, frozen since July 5, when Voyager filed for bankruptcy. The next day, company CEO Stephen Ehrlich took to Twitter, reassuring customers that they would "receive access" to funds locked in the MCB after "a reconciliation and fraud prevention process" was completed.
On July 15, the Wall Street Journal reported that Voyager had asked permission to honour withdrawal requests by seeking to release funds held in the MCB. A little over a fortnight later, the judge has granted this permission, and customers are set to receive their funds back.
Several parties keen to bailout the company
Earlier in July, Sam Bankman-Fried (SBF) proposed a restructuring deal that would effectively bailout the beleaguered crypto firm. However, Voyager rejected the offer, calling it a "low-ball bid dressed up as a white knight rescue", as per an official court filing. In the same filing, the company stated that it was capable of "delivering far more value to customers than the AlamedaFTX proposal."
In hindsight, rejecting SBF's offer seems to have been the right decision, with Voyager claiming it has received several "higher and better" buy-out bids since then. According to Voyager's presentation during the bankruptcy proceedings, the firm has received 88 bids and "expects to receive more" until August 26, which is the final bid deadline. The presentation also stated September 7 as the date for the sale hearing.
A positive sign for the crypto industry
The ruling to unlock and return customer funds is a good sign for the entire cryptosphere. This is because, in case of bankruptcy hearings, the fate of customer funds usually depends on the company's user agreement.
For instance, in its user agreement, Celsius states that funds deposited "may not be recoverable" in the event of bankruptcy. This is despite the fact that Celsius claims to have $167 million in cash on hand.
Another example would be Coinbase. In March 2022, the popular crypto exchange issued a similar statement after suffering a quarterly loss of $430 million and a 19 percent drop in monthly users. "The crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings," the company said in its statement. Users would be labelled as "general unsecured creditors," and their funds would become inaccessible.
Therefore, while Voyager customers can breathe a sigh of relief, the fate of Celsius and Zipmex customer funds remains in the balance.
