Following the recent suspension of withdrawals from its platform, Voyager has now filed for bankruptcy due to a loan default by Three Arrows which is also facing bankruptcy.
On Wednesday, cryptocurrency lender Voyager Digital Holdings declared bankruptcy due to its exposure to troubled hedge fund Three Arrows Capital.
According to a court document, the lender filed for Chapter 11 bankruptcy in the Southern District of New York.
The company’s estimated assets exceed $1 billion, and it has over 100,000 debtors. The move comes after the crypto lender temporarily halted withdrawals on its site.
Voyager had a large exposure to Three Arrows Capital, which is also negotiating a bankruptcy. Three Arrows recently defaulted on a $660 million loan from Voyager, which is presumably what prompted the lender’s new filing.
Voyager Bankruptcy Portends Trouble For Cryptocurrency
Bitcoin and Ethereum prices fell in response to the Voyager filing, with BTC dropping below $20,000. The move is likely to put greater pressure on crypto markets, as the majority of Voyager’s assets will now be liquidated to repay its lenders.
Voyager’s largest borrower appears to be Alameda Research, which provided the crypto lender with a $500 million credit line. Voyager had stolen approximately $75 million from the site.
The bankruptcy may also put a strain on Alameda’s finances, which could have an impact on cryptocurrency markets. FTX CEO Sam Bankman-Fried launched the broker.
FTX has also attempted to help other troubled cryptocurrency companies, notably BlockFi.
Voyager is merely the most recent victim of the crypto bear market. Celsius was the first lender to halt withdrawals in June. Following this, Three Arrows Capital and several other exchanges declared a significant lack of capital.
This wave of insolvencies comes as cryptocurrency markets have lost more than 60% of their value this year. As a result, numerous overleveraged players were subjected to margin calls that they were unable to fulfill due to falling crypto values.
Voyager, Three Arrows, and BlockFi have been chastised for facilitating high-risk loans with little prospect of recovery during the weak market.