Jacob spent six years building his cryptocurrency portfolio to 100 Ethereum ETH/USD — worth around $138,000.
It’s gone. And only because he made the decision to put the ETH in a Voyager Digital VYGVQ wallet.
What happened: Among the most recent to file for Chapter 11 bankruptcy, Voyager is the latest victim of the Terra LUNA/USD cryptocurrency crash and has frozen customer funds after suspending all activity on its platform in connection with Three Arrows Capital's (3AC) default and liquidation.
In its bankruptcy filing, Voyager reported it has over $110 million of cash and owned crypto assets on hand. It has about $1.3 billion of digital assets on its platform, 50% of which include claims against 3AC.
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Voyager's Chapter 11 approach is to give customers a combination of proceeds from the 3AC recovery, common shares of the reorganized company, and Voyager tokens — though Jacob and many others would rather see their assets returned in full, as any investor would.
“Voyager should have to return 100% of our crypto over time. The careless lending to 3AC seems like an intentional failure,” Jacob said in a handwritten letter sent to Judge Michael E. Wiles. “I spent years building that portfolio — my family's future is ruined if they just get to not return my assets.”
The Sam Bankman-Fried led quantitative research firm, Alameda Research, sent a restructuring offer to Voyager that would see Alameda assume Voyager’s assets at market value with any 3AC-related loans to be left out. The deal also included an offer to Voyager’s customers to open accounts with Fried’s crypto platform, FTX, and receive their share of claims in the accounts.
The deal was rejected — Voyager calling it a ‘low-ball’ offer.
Related: 'Low-Ball Bid': Bankrupt Voyager Rejects Sam Bankman-Fried Firms' Buyout Offer
Take Don, for example, another Voyager customer who has a substantial amount of money tied up with the failed firm, “I currently have around 31K frozen on the Voyager exchange,” he said. “I wake up most nights and just walk up and down the stairs contemplating on my own mistakes and wondering if this will ever end. My anxiety has been a struggle. Having hope one day, and the next day have it dashed away.”
If Voyager had accepted the deal, customers like Jacob, and Don, would’ve had access to a substantial portion of his assets, almost immediately.
Voyager CEO Steve Ehrlich told Benzinga in early June — just weeks before filing for bankruptcy — that all customer assets were safe.
"Our partnership with Celsius [another bankrupted firm] ended a while ago, so our customers' assets are safe, and we're processing everything as normal," Ehrlich said.
Voyager told its customers that operations were normal up until it announced it was pausing withdrawals — now the company's customers are left wondering if they'll ever be given a chance to reclaim their digital currency.
Disclosure: Benzinga CEO Jason Raznick Is a member of the unsecured creditor committee in the Voyager Digital bankruptcy case.
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