In a bankruptcy court ruling on Monday, Voyager Digital was granted permission by the U.S. Federal Bankruptcy Court to refund $270 million to affected customers. Voyager received approval on Thursday from presiding judge Micheal Wiles to return funds to customers held in custodial accounts at Metropolitan Commercial Bank (MCB).
The New Jersey-based crypto firm filed for chapter 11 bankruptcy in July as crypto prices plummeted–creating a bank run that forced Voyager to halt withdrawals.
Following the liquidity crunch, Voyager sought the court’s permission to honor customer withdrawal requests for cash funds held in custody at the MCB.
Of the remaining funds on the platform, totaling just over $1 billion, Voyager said that these belong to the bankruptcy estate, which will be distributed among all creditors.
Voyager’s collapse comes amid its exposure to prominent crypto hedge fund Three Arrows Capital (3AC).
Voyager’s loan obligations unpacked
Voyager lent 3AC roughly $660 million; however, in light of the hedge fund’s $200 million exposure to Terra, it defaulted and could not repay the loan.
3AC’s default prompted Voyager CEO Stephen Ehrlich to seek help from Moelis & Company as financial advisors.
Further loan obligations to Voyager include $34.4 million from Mike Novogratz’s investment firm Galaxy Digital and $17.5 million from digital asset lender Genesis Global Capital.
Both Galaxy Digital and Genesis Global Capital also had exposure to 3AC and Terra.
Galaxy Digital announced a $10.6 million share repurchase program following its exposure to Terra in May.
Michael Moro Genesis’ chief executive officer admitted in a series of tweets that the loans to Three Arrows had a weighted average margin requirement of over 80%, without disclosing the size of the loan.
Other reasons for Voyager’s bankruptcy may also come down to excessive customer rewards.
Following a deal signed with the Dallas Mavericks, it offered $100 worth of crypto awards, with the company offering annual rates between 8% to 10% on more than 40 assets.
Voyager expects to conclude its sale process in September, with FTX Trading making an offer to purchase some of Voyager’s assets as well as take on some of its customers.
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