Plans by bankrupt cryptocurrency lender Voyager Digital to sell its assets to cryptocurrency exchange FTX US for $ 1.4 billion have so far gone relatively well, but a big problem emerged on Wednesday: Voyager executives included a broad legal immunity for themselves in the proposed sales agreement.
In a partly redacted objection to Voyager’s proposed sale agreement, Voyager’s unsecured creditors committee (UCC) pushed back against the provision for “broad releases” that would shield the crypto lender’s directors and officers – the individuals “principally responsible for the debtors’ financial woes,” according to the filing – from future lawsuits.
In its current form, the sale agreement is contingent on the provision of legal immunity.
Attorneys for the UCC describe a “Hobson’s choice” for Voyager’s creditors: to either support the sale agreement as-is and have a chance at getting their money back faster while allowing Voyager’s executives to get off scot-free, or to fight the plan and risk the bankruptcy process “devolving into a morass of litigation, to the sole detriment of unsecured creditors, whose assets will continue to remain frozen for a far longer period of time.”
According to Wednesday’s filings, the UCC conducted an investigation into Voyager’s executives’ conduct to find out what the legal immunity would shield them from and called its findings “sobering.”
Details of the UCC’s findings are currently unavailable, but the attorneys argued that attempts to protect the executives from lawsuits were “particularly egregious” because of the potential for “colorable and valuable causes of action against these directors and officers.”
The UCC’s objection urges the court overseeing Voyager’s bankruptcy proceedings to reject the provision for legal immunity but proceed with the sale agreement.
Voyager filed for bankruptcy in July after the implosion of crypto hedge fund Three Arrows Capital in June. Voyager made a $670 million loan to Three Arrows early this year.
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