The crypto winter has overcast the summer for many Voyager customers. Upon the commencement of Voyager’s chapter 11 filing in July, customer accounts were frozen. Unable to trade their own crypto assets, some frustrated customers rushed to consult with legal counsel. Others began studying bankruptcy law in the hopes of finding a legal solution. It was only late last week, on August 4, when some customers found relief from the crypto storm: Judge Michael Wiles approved Voyager’s motion to allow certain customers who had cash in their accounts to withdraw cash, up to $270 million.
But what about Voyager’s customers whose crypto assets are not included in the court’s ruling? Judge Wiles also approved Voyager’s bid procedures motion, with certain modifications, setting an expedited timeline for a sale of substantially all of Voyager’s assets that will conclude with a September 8 sale hearing in the bankruptcy proceeding. Voyager had approximately $1.3 billion of crypto assets on the platform as of early July 2022. These assets will likely be sold with the company by September 8.
Ignoring many customers’ frustrations expressed through a broad letter-writing campaign,1 Voyager is moving forward with the bid process to sell the company. This has been Voyager’s goal from the outset, despite some Voyager customers still raising questions about the status of their crypto assets at the August 4 hearing. Voyager has claimed ownership of customers’ crypto assets with the submission of the most updated user agreement to the court. The most recent version states that customers’ crypto assets are under Voyager’s name. Based on this claim, Judge Wiles has approved Voyager’s bid procedures motion without further questioning the ownership of crypto assets.
While a sale process is a typical event in bankruptcy, this is not a typical bankruptcy. Let’s not forget. This case is about Voyager’s customers and there is a looming question: can Voyager’s customers recover their crypto assets without going through the bankruptcy proceeding?
The answer may be yes. Here’s the argument that Voyager customers could make and the next steps they should consider taking:
If the crypto assets are not property of the bankruptcy estate, Voyager customers are entitled to their return without seeking relief from stay in the bankruptcy proceeding. If the court agrees, there are important process points to consider given customer identification sensitivities:
How do you determine the ownership of private keys?
What are a Voyager customer’s potential next steps based on this argument?
Private key is a key element of blockchain. It may also be the key for Voyager customers to protect themselves through the court-approved sale process that is ongoing.
1. Voyager customers have submitted approximately 30 letters on the docket at https://cases.stretto.com/Voyager/court-docket/. For example, in a letter to Judge Wiles filed on July 21, 2022, a Voyager customer claimed that “many customers of Voyager… have been defrauded quite literally.”
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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