Voyager Digital could come under added scrutiny after its marketing came on the radar of the FDIC, reportedly because come customers of the platform did not understand the scope of FDIC protection for their deposits, leading to questions around the marketing of the firm.
Depositors In For A Surprise
Voyager Digital account holders were in for a bit of a surprise as the crypto brokerage and lender filed for bankruptcy on Tuesday. Depositors were stunned to discover that their deposits did not have the same protection they thought they did. These developments could signal additional consequences for an embattled company.
Voyager Digital had filed for bankruptcy under Chapter 11, stating that it had debts of up to $10 billion that it owed to around 100,000 creditors. The crisis was exasperated by the collapse of the Singaporean hedge fund, Three Arrows Capital (3AC), which had defaulted on a loan of 15,250 BTC and 350 million USD Coin (USDC) just a week prior.
Marketing Under The Scanner
Voyager Digital’s website stated that the customer’s USD is held by the company’s banking partner, the Metropolitan Commercial Bank, which is ensured by the FDIC. It further assured customers that because of this, the cash they hold with Voyager is protected. The Metropolitan Commercial Bank holds around $350 million in deposits from the customers of Voyager Digital.
However, the bank issued a statement explaining that the FDIC does not provide protection against Voyager Digital’s failure or against the loss of cryptocurrency deposits. The FDIC (United States Federal Deposit Insurance Corporation) insures accounts for up to $250,000 per depositor in case of failure of the bank, the bank explained in a statement. Frances Schadenfreude Cassandra shared the bank’s statement on Twitter, tweeting out,
“Statement from Metropolitan Commercial Bank about #FDIC insurance for #Voyager customers. Bad news, I’m afraid.”
The Wall Street Journal reported on Thursday, citing unnamed sources, that Voyager Digital depositors expected to receive all the cash from their accounts held in the Metropolitan Commercial Bank, as they were promised by Voyager Digital, prompting the FDIC to look into the claims.
A Proposed Reorganization
Voyager Digital, on its part, claimed in its proposed reorganization foresaw that, subject to specific contingencies, customers who hold crypto in their accounts will receive a combination of crypto, shares, and proceeds from the 3AC recovery.
“Customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens.”
Ties With Sam Bankman-Fried And Alameda Research
It also came to light that Voyager Digital had a complex financial relationship with Alameda Research, a project backed by Sam Bankman-Fried of FTX. Alameda Research is Voyager Digital’s largest shareholder while also being the organization’s largest creditor at $377 million. It also owes Voyager Digital $75 million.
“Two most interesting things in the Voyager bankruptcy petition: (1) Voyager’s second-largest exposure is to Alameda Research. So there’s some recycled capital. Voyager loans Alameda $377M, & Alameda reloans Voyager $75M. Plus, Alameda is Voyager’s largest shareholder (9.5%).”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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