By James Nani
Voyager Digital’s deal to unload its crypto assets in a $1.4 billion bankruptcy sale to FTX US received initial approval from a New York court this week.
Other interested bidders can still make higher offers for the assets. But the sale would be part of the crypto lender’s broad Chapter 11 liquidation plan that will need court approval in December.
The transaction, for now, is the leading offer that would migrate more than 1 million customer accounts to FTX. The $1.4 billion price tag largely reflects the estimated future value of Voyager customers’ cryptocurrency.
If Voyager’s liquidation plan is court-approved, secured and other priority claims would be paid in full. The bankruptcy estate could then go after debt it says it is owed by defunct hedge fund Three Arrows Capital and others.
Voyager customers who held accounts on the platform and other general unsecured creditors would receive an estimated 72% recovery of their claims.
Account holders are expected to receive a mix of cryptocurrencies, US dollars, or USDC—a cryptocurrency pegged to the value of the US dollar.
If the sale to FTX is finalized, account holders’ payout currency will depend on whether they choose to migrate to FTX. Their currency recoveries also will be partly based on when or if they migrate their account and which cryptocurrencies FTX’s platform supports.
Voyagers’ attorney said in a court this week that the “vast majority” of the more than 1 million account holders are expected to transfer over to the FTX platform.
Account holder claims also will be decided based on the fair market value of the cryptocurrency they held in their Voyager account on July 5, according to Voyager’s court disclosures. That’s when Voyager declared bankruptcy.
That means if a Voyager account had 1 Ether worth $1,131.60 on July 5, that claim is worth $1,131.60. That account holder will presumably get 72% of $1,131.60.
Once a customer determines their claim amount, they must then figure out their “initial distribution,” which will be a pro rated share of their claim. The initial distribution will largely be funded by the FTX sale proceeds. Later payouts could come from other sources.
To receive an initial distribution in mostly cryptocurrency, customers must sign up and maintain an account with FTX. Customers who don’t sign up for an FTX account will, after a migration period, ultimately be paid back in cash.
Under the proposed plan, the initial distribution customers receive in their FTX account depends on their claims and the 20-day historical average price of that cryptocurrency based on a future point in time that hasn’t been publicly announced.
Voyager customers who have a type of cryptocurrency that FTX doesn’t support would receive USDC. FTX’s platform plans to expand to support more cryptocurrencies in the upcoming months, according to Voyager disclosures.
After the company’s bankruptcy plan is confirmed, Voyager will wind down, according to its disclosures. VGX token, Voyager’s digital currency, “will have no utility going forward,” according to company disclosures.
FTX has offered to buy all of Voyager’s VGX for $10 million, according to court records. But that offer for VGX wasn’t part of the asset sale approved on Wednesday.
Voyager has said it will still seek other higher offers for its VGX coins.
Assuming the FTX deal is finalized, FTX will only be in charge of making the initial distributions to migrating customer.
All of the remaining proceeds from the sale will be returned to the Voyager’s bankruptcy estate. The debtors will then make distributions to those that didn’t migrate over to FTX, according to Voyager disclosures.
While Voyager works on completing the FTX sale through its Chapter 11 plan, preparations will likely begin for the migration of customer accounts to FTX. Voyager will also begin gathering votes from creditors to approve its plan.
FTX also plans to offer to customers that move over a $50 deposit into their accounts if they execute at least one trade on its platform.
Voyager is expected to go after the nearly $650 million in loans it made to defunct hedge fund Three Arrows Capital, which has also filed for bankruptcy protection. Any money Voyager collects from that would be used to pay down remaining claims from account holders.
To contact the reporter on this story: James Nani in New York at jnani@bloombergindustry.com
To contact the editors responsible for this story: Maria Chutchian at mchutchian@bloombergindustry.com; Roger Yu at ryu@bloombergindustry.com
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