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CHAPTER 11 BANKRUPTCY

Updated: Jun 8, 2023

- VOYAGER

- 6 TYPES OF BANKRUPTCY IN THE US



VOYAGER's DEFENCE MECHANISM AGAINST ITS CREDITORS => CHAPTER 11 BANKRUPTCY


VOYAGER SUSPENDS WITHDRAWAL, LENDING & TRADING

Customers staked their assets in Voyager's platform- Benefit - Earn interest by staking their assets. Interest is created by lending out customers' assets to hedge funds


One of the loans went bad.

50% OF Voyager's entire loan given out was made to a single hedge fund. 650Million to 3AC- invest in LUNA -> when UST collapsed->erased the loan's value. 3AC became insolvent. Since 3AC is not able repay its loan to Voyager,in turn, Voyager became insolvent.


Filing for Bankruptcy chapter 11 enabled Voyager to stay alive.



Stock broker/commodity brokers are not allowed to file for chapter 11 bankruptcy.

Liquidated under special law SIPA (Securities Investors Protection Acts). This act was designed for such cases where brokerages go bust. The provision under this act entitles investors to get paid first in the event of bankruptcy/liquidation. However, Voyager did not do this.


All customer's crypto is theirs. This means that the crypto assets customers purchase through their platform still belong to the company. So the customers are deemed as Unsecured Creditors.


Voyager lent out customers assets at high interest rate to 3AC. 3AC used that loan to buy a big portion of LUNA tokens. When LUNA crashed, 3AC was unable to settle its debt obligations with Voyager.



CHAPTER 11 BANKRUPTCY

The most complex form of a bankruptcy proceeding

It allows a company to stay in business & restructure its obligations.

The decision to file for this section of bankruptcy must be in the best interest of CREDITORS.













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