Voyager Digital Suspends Deposits, Withdrawals Blaming 3AC Default

Key Insights:

• Trading, deposits, and withdrawals were halted at 14:00 EDT on July 1.
• The company blames a loan default by crypto hedge fund Three Arrows Capital.
• Voyager is the latest to suspend withdrawals, citing current market turmoil. 

On July 1, Voyager Digital announced that it suspended trading, deposits, withdrawals, and loyalty rewards, effective at 14:00 EDT. It has become the latest major crypto firm to suffer due to extreme market conditions.

Stephen Ehrlich, CEO of the crypto lending company, said, “This was a tremendously difficult decision, but we believe it is the right one given current market conditions,”

He added that the move gives the firm additional time to “continue exploring strategic alternatives with various interested parties” while preserving the platform’s value.

3AC Default to Blame

The company had previously stated that its subsidiary, Voyager Digital LLC, issued a notice of default to Three Arrows Capital (also known as 3AC) on June 29 for failure to repay loans.

Singapore-based 3AC, one of the industry’s largest crypto-focused hedge funds, had borrowed 15,250 BTC and $350 million USDC from Voyager.

Voyager stated it was “actively pursuing all available remedies for recovery from 3AC, including through the court-ordered liquidation process in the British Virgin Islands.”

Voyager is actively pursuing all available remedies for recovery from 3AC, including through the court-ordered liquidation process in the British Virgin Islands.

— Stephen Ehrlich (@Ehrls15) July 1, 2022

The company has tapped Moelis & Company and The Consello Group as financial advisors, and Kirkland & Ellis LLP as legal advisors. Voyager also provided several financial and balance sheet updates, in accordance with Canadian Securities Laws.

On June 22, Voyager announced that it had entered into a loan agreement with Alameda Ventures to alleviate some of its exposure to 3AC. The “definitive agreement” with Alameda involved a “revolver” of $200 million in cash and USDC and a 15,000 BTC loan.

Alameda indirectly holds more than 22 million common shares of Voyager, representing around 11.56% of the outstanding Common and Variable Voting Shares. Voyager share (VYGVF) prices plunged as much as 40% on Friday after the trading suspension announcement.

On June 30, the Monetary Authority of Singapore (MAS) reprimanded Three Arrows Capital for providing false information and exceeding the assets under management (AUM) threshold.

Voyager Digital joins the likes of Celsius and CoinFLEX, which have also halted withdrawals for their customers amid the current market turmoil.

Crypto Markets Still Sliding

The bad news keeps flowing in the crypto industry, resulting in rock bottom market sentiment. The total crypto market capitalization has retreated a further 4% over the past 24 hours, falling to just over $900 billion.

Over the past month, crypto markets have lost 34%, or $467 billion, and are currently down 70% from peak levels last November.

Bitcoin (BTC) was struggling at $19,274, and Ethereum (ETH) had lost more than 4% in a fall to $1,057 at the time of writing.

It is unlikely that there will be any return of positive sentiment or price action until all of this leverage is finally flushed out of crypto markets.