This is an unusual offer.
But it’s a proposal that is likely to give some heartfelt comfort to clients of bankrupt crypto lender Voyager Digital.
The latter had indeed lost hope of being able to recover their assets/funds after the crypto lender, victim of the default of hedge fund Three Arrows Capital, or 3AC, on a loan, filed for Chapter 11 bankruptcy at the beginning of the month.
According to official documents from Voyager Digital, retail investors are not at the top of the list of secured creditors. Their claims are considered unsecured, which means they are not certain that they will ever be able to get their money back.
But an unusual event has just occurred. The young crypto billionaire Sam Bankman-Fried, founder of the crypto exchange FTX.com, proposes a restructuring plan whose goal is to allow Voyager Digital customers to recover a portion of their funds. The merit of this proposal is that it will attract these customers to FTX.com at the same time.
Early Access to their Liquidity
Indeed, the offer is in two parts. Alameda, a trading firm owned by Bankman-Fried, would buy all of Voyager Digital’s assets in cash, including loans except those made to failing hedge fund 3AC.
Meanwhile, FTX, Bankman-Fried’s cryptocurrency trading platform, would offer Voyager Digital customers the option to receive their money early by opening an account on FTX. Any Voyager Digital customer who does not want to open an account on FTX retains their rights in the bankruptcy proceedings, but will not receive early cash on their claims via FTX.
The offer is non-binding and has yet to be accepted by Voyager Digital.
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“Under the joint proposal, customers of Voyager would have the opportunity to start a new account with FTX with an opening cash balance funded by an early distribution on a portion of their bankruptcy claims,” FTX explains in a recent press release that you can find here.
“Customers would be able to withdraw their cash immediately, or use it to purchase digital assets on the FTX platform. No customer is required to participate, and participation in the joint proposal is fully voluntary,” the firm adds.
Alameda had already granted a $75 million line of credit to Voyager Digital before the firm filed for bankruptcy. As part of the new offer, Alameda will erase this claim.
It’s a sort of win-win formula because the offer gives a positive and savior image to Bankman-Fried and FTX, which will also allow it to win new customers. The offer is also an ideal ad for FTX at a time when mistrust of the cryptocurrency industry returns. They will be seen as the “good guys”.
Bankman-Fried Power Continues to Grow
“Voyager’s customers did not choose to be bankruptcy investors holding unsecured claims,” says Sam Bankman-Fried, CEO of FTX. “The goal of our joint proposal is to help establish a better way to resolve an insolvent crypto business – a way that allows customers to obtain early liquidity and reclaim a portion of their assets without forcing them to speculate on bankruptcy outcomes and take one-sided risks.”
Since the beginning of the liquidity crisis that the crypto industry is currently going through, Bankman-Fried has established itself as the new savior, much like JPMorgan Chase bank at the time of the financial crisis of 2008. It has thus extended its power by bailing out crypto lender BlockFi, which gave it an option to acquire the platform. FTX is in talks to buy Bithumb, a South Korean cryptocurrency exchange.
Bankman-Fried also became one of Robinhood’s largest shareholders. And the young 30-year-old billionaire does not intend to stop there. He wants to continue to extend his power over an industry that nevertheless likes to present itself as decentralized in opposition to the traditional financial system.
“We could certainly see ourselves spending some number of hundreds of millions beyond what we have thus far, and in some cases more than that,” Bankman-Fried told CNBC on July 22.
To finance its ambitions, FTX is in discussions to raise new funds, according to Bloomberg News.