Jeremy Hill, Bloomberg News
Jul 8, 2022
The judge overseeing crypto lender Voyager Digital Ltd.’s first-of-its-kind bankruptcy got a crash course in digital assets on Friday in the company’s first appearance in court.
Judge Michael Wiles, who said he’s relatively new to crypto, received a real-time primer on concepts like staking and stablecoins from a lawyer for Voyager. The crypto platform filed for Chapter 11 protection earlier this week, and its users likely won’t get all of their holdings returned.
Both the lawyer and Wiles acknowledged the murky legal questions hanging over the case -- like how, exactly, a bankruptcy court should treat digital assets.
“I think for many of us this is unchartered territory,” Joshua Sussberg, a Kirkland & Ellis lawyer representing Voyager, said in the hearing. “There will be many potential legal issues of first impression.”
Wiles quickly dug into Voyager’s relationship with account holders, pressing Sussberg for details on whether the company acts as a custodian for customer money or whether users are more like depositors at a bank. Of particular interest to Wiles is the US$350 million held by Metropolitan Commercial Bank on behalf of customers.
“That money belongs to those customers and will go to those customers,” Sussberg said, adding that the company will have to sort through who owns what and conduct a fraud prevention process before returning the money.
As for the rest of Voyager’s assets -- including US$1.3 billion of commingled crypto -- the company plans to gives users a yet-undetermined slice of the crypto they’re owed, stock in Voyager, tokens tied to the platform and their share of any money recovered from now-bankrupt hedge fund Three Arrows Capital.
That plan could change if Voyager is able to find a buyer for its business. The company has identified “some interested parties” and will continue to pursue a sale, Christopher Marcus of Kirkland & Ellis said in the hearing. In the meantime, Voyager is parrying threats to it business like banks trying to close their accounts, states trying to void their money transmitter licenses, and angry customers threatening the company’s management.
“We are focused on a path forward,” Marcus said. “It is not correct to think that there is no hope.”
The bankruptcy is Voyager Digital Holdings Inc., 22-10943, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
Judge Michael Wiles, who said he’s relatively new to crypto, received a real-time primer on concepts like staking and stablecoins from a lawyer for Voyager. The crypto platform filed for Chapter 11 protection earlier this week, and its users likely won’t get all of their holdings returned.
Both the lawyer and Wiles acknowledged the murky legal questions hanging over the case -- like how, exactly, a bankruptcy court should treat digital assets.
“I think for many of us this is unchartered territory,” Joshua Sussberg, a Kirkland & Ellis lawyer representing Voyager, said in the hearing. “There will be many potential legal issues of first impression.”
Wiles quickly dug into Voyager’s relationship with account holders, pressing Sussberg for details on whether the company acts as a custodian for customer money or whether users are more like depositors at a bank. Of particular interest to Wiles is the US$350 million held by Metropolitan Commercial Bank on behalf of customers.
“That money belongs to those customers and will go to those customers,” Sussberg said, adding that the company will have to sort through who owns what and conduct a fraud prevention process before returning the money.
As for the rest of Voyager’s assets -- including US$1.3 billion of commingled crypto -- the company plans to gives users a yet-undetermined slice of the crypto they’re owed, stock in Voyager, tokens tied to the platform and their share of any money recovered from now-bankrupt hedge fund Three Arrows Capital.
That plan could change if Voyager is able to find a buyer for its business. The company has identified “some interested parties” and will continue to pursue a sale, Christopher Marcus of Kirkland & Ellis said in the hearing. In the meantime, Voyager is parrying threats to it business like banks trying to close their accounts, states trying to void their money transmitter licenses, and angry customers threatening the company’s management.
“We are focused on a path forward,” Marcus said. “It is not correct to think that there is no hope.”
The bankruptcy is Voyager Digital Holdings Inc., 22-10943, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
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