Crypto Voyager Lender Settles With Executives Approving Risky Loan

Crypto Voyager Lender Settles With Executives Approving Risky Loan

  • Voyager’s $935 million loan to 3AC remains unpaid
  • 3AC’s bankruptcy contributed to Voyager’s bankruptcy

(Reuters) – Crypto lender Voyager Digital has agreed to settle claims against company executives who approved a risky $1 billion loan to crypto hedge fund Three Arrows Capital (3AC) after minimal due diligence, a misstep that contributed to the company’s bankruptcy. Voyager itself.

Voyager said in court on Monday deposit That filing a lawsuit against CEO Stephen Ehrlich and another CEO would not be cost-effective. Instead, Ehrlich will pay Voyager $1.125 million in cash, and the company will pursue refunds of directors and employee insurance policies worth up to $20 million, according to the filing.

Voyager filed for bankruptcy protection in July, citing a June 2022 loan default at 3AC as a major factor in its bankruptcy. 3AC began liquidation proceedings in the British Virgin Islands in late June.

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Voyager lost significant value during the cryptocurrency’s industry-wide plunge due to the May 2022 crash of the Terra Luna stablecoin and prevented clients from withdrawing their crypto assets shortly before filing for bankruptcy.

The loan to 3AC consisted of 15,250 bitcoins and $350 million in coins, a stablecoin whose value is pegged to the US dollar. The cryptocurrency loan amounted to $935 million in April 2022, according to Court documentsBut the price of Bitcoin has since halved, bringing the loan value closer to $650 million today.

Ehrlich approved the 3AC loan based on just a one-page summary indicating that the hedge fund has $3.729 billion in crypto assets, according to court documents. 3AC declined to provide more detailed financial information, saying that it had previously had a bad experience with a competitor who used information about its crypto holdings to replicate its trading strategy.

The Voyager board has chosen to settle the company’s 3AC-related claims against Ehrlich and chief commercial officer Evan Psaropoulos, both of whom remain in leadership positions at Voyager, according to a court filing on Monday.

While the settlement is “just a small part” of 3AC’s potential loss, the fight to recover more of the two men’s personal assets will only increase legal costs and reduce recovery from D&O policies, according to Voyager.

Ehrlich and Psaropoulos could not be reached for comment.

Crypto exchange FTX was the winning bidder in a bankruptcy auction for Voyager’s assets last month.

Voyager intends to sell its business to FTX for $1.42 billion, after previously rejecting FTX’s bid as a “low-key offer dressed as a rescue of the white knight.”

FTX sale and 3AC loan settlements must be approved in bankruptcy court before they can take effect.

Case before: Voyager Digital Holdings Inc. , US Bankruptcy Court for the Southern District of New York, No. 22-10943

For Voyager: Joshua Susberg, Christopher Marcus, Kirkland’s Kristin Okek and Ellis

Read more

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Crypto Lender Voyager Digital Files For Bankruptcy

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Our criteria: Thomson Reuters Trust Principles.

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