Latest bill brings total compensation bills to $16.4 million for bankruptcy and restructuring firm.

McDermott Will & Emery, a law firm representing Voyager’s committee of unsecured creditors, has billed the group $5.1 million for the work it completed from March to May.

This latest bill brings the total compensation charged to the group to $16.4 million, above the $11.2 million that was budgeted as part of the restructuring process. So far, the creditors have paid out $8.9 million of this billed compensation.

Some of the largest areas of billings from McDermott attorneys for the period include $1 million billed for 970.9 hours of work on plan and disclosure settlement, which involves discussing sale options with the Debtors and meeting potential buyers and examining objections presented by other stakeholders.

In prior fee periods, significant work in this category was done on a potential sale of the company’s assets to FTX, a deal that collapsed with the bankruptcy of the exchange.

All of this comes on top of a $1.1 million bill Voyager, the debtor, paid to the law firm Kirkland & Ellis for work it’s done to represent the exchange (the debtors in this case).

The 2022 market downturn led to many bankruptcies, which have been profitable for law firms, with firms like FTX and Celsius spending over $200 million and $50 million, respectively, on legal fees.

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The Department of Justice doesn’t like provisions that would render the company immune from prosecution for former wrongdoing

The $1 billion deal offered by Binance.US to buy assets of bankrupt crypto lender Voyager should be put on hold while key legal objections are ironed out, the U.S. government said in a filing on Tuesday.

The move follows an appeal by the U.S. Trustee, a branch of the Department of Justice responsible for bankruptcy cases, which has concerns the deal would effectively absolve Voyager and its staff from breaches of tax or securities law.

“The Court cannot tell the Government to speak now or forever hold its peace before Voyager and Binance.US wed,” the filing by U.S. Attorney Damian Williams said. “Nothing in the Bankruptcy Code permits courts to exculpate parties from liability to the Government for past and future conduct.”

Williams said approval of the deal should be put on hold – or at least those parts which limit the government’s ability to enforce the law – until appeals are dealt with in higher courts.

Last week, New York bankruptcy judge Michael Wiles approved the deal, after showing considerable skepticism of arguments from the Securities and Exchange Commission that Voyager’s VGX token might be an unregistered security.

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Federal and New York regulators object to a billion-dollar deal they say may be unlawful and discriminatory as they examine Voyager’s VGX token.

A $1.02 billion deal by Binance.US to purchase assets of defunct crypto lender Voyager has been opposed by New York and Federal finance regulators, who said in Feb. 22 filings it could prove discriminatory and unlawful.

The move follows increasing interventions into crypto by the Securities and Exchange Commission, whose probes into the alleged sales of unregistered securities recently caused crypto exchange Kraken to shutter crypto staking operations.

Elements of the proposed Binance.US-Voyager deal may also infringe the law, given how the plan envisages repaying Voyager’s former customers, the SEC said.

Under the deal, “the transactions in crypto assets necessary to effectuate the rebalancing, the redistribution of such assets to Account Holders, may violate the prohibition in Section 5 of the Securities Act of 1933 against the unregistered offer, sale, or delivery after sale of securities,” a filing by the SEC said, citing in particular the VGX token issued by Voyager.

“It is the Debtors’ burden to present credible evidence that the provisions of the Plan are feasible and not in violation of applicable law,” the SEC said. The regulator also cited media reports that Binance is bracing itself to pay penalties for past infractions of money laundering and corruption law as evidence that the deal could become “unfeasible” and “impossible to consummate.”

The deal was also opposed by New York State’s Department of Financial Services (NYDFS) and Attorney General Letitia James in two Feb. 22 filings, including allegations that Voyager was unlawfully serving customers in the state.

“Despite the fact that none of the Debtors are licensed in New York, the Department is aware of allegations and other information indicating that one or more of the Debtors may have operated and may be continuing to operate in New York in violation of Applicable Law,” the NYDFS filing said.

Voyager “onboarded New York customers and thus illegally operated a virtual currency business within the state without a license, in violation of New York laws and regulations,” depriving its customers of protection, the filing added. The plan also discriminates against New Yorkers who won’t be able to reclaim their crypto for six months while Binance.US gains approval in the state, NYDFS said.

In January, the SEC filed a limited objection to the deal, saying there wasn’t enough detail to show Binance.US could afford it. The Federal Trade Commission has also indicated it is probing Voyager, which filed for bankruptcy in July, for deceptive marketing.

Voyager had previously argued that the Binance.US deal offers the best possible outcome for creditors, and that NYDFS objections are “hypocritical” because the regulators themselves are limiting the ability to distribute crypto.

Voyager creditors themselves had until 16:00 Eastern Time on Wednesday to approve the deal, and the company’s counsel has said that with a few hours of voting left the vast majority had done so.

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CoinDesk reported last week that Binance.US would be preparing a bid for the bankrupt lending platform

Binance CEO Changpeng “CZ” Zhao has confirmed that the exchange’s U.S. wing will be making a fresh bid for crypto lender Voyager now that the defunct FTX is unable to follow through with acquiring it.

CoinDesk reported last week that Binance.US would be preparing a bid for the bankrupt lending platform, which Zhao confirmed in an interview with Bloomberg on Thursday.

“Binance.US will make another bid for Voyager now, given FTX is no longer able to follow through on that commitment,” he said.

Following Voyager’s bankruptcy, FTX emerged as the front runner to acquire the lender, with Binance’s bid said to be held back by concerns that it would represent a national security concern for the U.S. government.

“I think the U.S. national security concerns were rumors spread by FTX to try and push us out of the bid,” Zhao said. “There was never any concerns about us participating in the bid.”

Binance has been dogged by claims that it is a Chinese company, given it is the country of Zhao’s birth, though he grew up in Canada. “I am a Canadian citizen, period,” he wrote in a blog post in September.

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Voyager’s and Celsius’ bankruptcies were preceded by announcements that they were barring customers from getting their money.

Bank runs are nothing new. Those frightening incidents when too many customers demand their money back at the same time have destroyed many financial institutions over the years.

Traditional banks largely solved that with deposit insurance, a guarantee from the Federal Deposit Insurance Corp. to make customers whole up to a certain amount if their bank fails.

With no such protection in crypto, the phrase “suspending withdrawals” has become a source of fear in 2022, a sign of deep trouble at firms that have tried to create a modern version of banking through digital assets. Customers who trusted the lender or exchange with their cryptocurrencies are suddenly unable to get the assets back.

One example is crypto broker Voyager Digital. Its Canadian-listed stock plunged 42% on July 4 after it said it was “temporarily suspending trading, deposits, withdrawals and loyalty rewards.” The situation got worse days later when the company filed for bankruptcy.

Voyager’s troubles came as crypto prices remained hugely depressed from their peaks. And it illustrates that when a crypto firm pauses withdrawals – warning the world of serious liquidity issues – it will have trouble restarting them outside of bankruptcy court.

“The problem is, once the withdrawal suspensions happen, it’s too late for the investors,” said Paul McCaffery, co-head of equities for Keefe, Bruyette & Woods.

When crypto lenders go broke
Following the collapse of the stablecoin terraUSD (UST) and the implosion of crypto hedge fund Three Arrows Capital, known as 3AC, a swath of liquidity-strapped crypto lenders found that they could no longer meet customer demands.

Throughout June and early July, lenders including Celsius Network, Babel Finance, CoinFLEX, Voyager, Vauld and Zipmex halted withdrawals and transfers. Others such as CoinLoan and Finblox allowed withdrawals to continue, but at a reduced limit.

When crypto lenders go broke, the traditional financial regulatory system can’t help. The FDIC, which backstops deposits at conventional banks in the U.S., released a fact sheet on July 29 reminding the public of that.

Some lenders, such as Zipmex, have been able to recover and start releasing select tokens back to users’ wallets. The majority of lenders, however, have kept withdrawals paused, with Celsius joining Voyager in bankruptcy.

No one can predict how far the domino effect of solvency issues will run, but it’s a safe bet crypto players will shudder if any other firms warn they are suspending withdrawals.

“The announcements are decelerating but not likely quite done yet as the fallout from the 3AC solvency continues to play out,” McCaffery wrote in an email to CoinDesk. “I am hopeful that all of this bloodshed will result in better risk management processes embedded in the business models going forward.”

Timeline of suspended withdrawals
June 12: Celsius says that it is “pausing all withdrawals, swaps and transfers between accounts.” (Celsius filed for bankruptcy on July 13.)
June 17: Babel says that “redemptions and withdrawals from Babel Finance products will be temporarily suspended.”
June 23: CoinFLEX announces that it is “pausing all withdrawals.”
July 1: Voyager Digital says that it is “temporarily suspending trading, deposits, withdrawals and loyalty rewards.” (Voyager filed for bankruptcy on July 5.)
July 4: Vauld says that it “made the difficult decision to suspend all withdrawals, trading and deposits.”
July 20: Zipmex says that it is “pausing withdrawals until further notice.”

The post Want to Strike Terror in Crypto Markets in 2022? Just Say You’re Suspending Withdrawals appeared first on Crypto Insider.

FTX CEO Sam Bankman-Fried said his firm’s offer would give Voyager customers back 100% of the remaining assets, while Voyager’s lawyers argue that it only benefits FTX.

Lawyers representing bankrupt crypto lender Voyager Digital have responded to a proposal by FTX to offer early liquidity to Voyager customers by calling it a “low-ball bid dressed up as a white knight rescue” that only benefits FTX.

In a court filing, Voyager’s lawyers said the plan “transfers significant value to AlamedaFTX, and completely eliminates the value of assets that are of no interest to AlamedaFTX.”

Under FTX’s plan, first proposed late last week, interested Voyager customers would be able to have an advance on their bankruptcy claims.

They could use this to buy more digital assets on FTX, or withdraw cash.

In a tweet thread, FTX’s CEO Sam Bankman-Fried said that this would give Voyager’s customers the ability to access assets that would otherwise be locked up for a significant time as the case navigates through bankruptcy court.

“To clarify: Our offer would give Voyager customers back 100% of the remaining assets that Voyager has, including claims on anything recovered in the future,” Bankman-Fried tweeted.

Voyager’s lawyers, in the filing, wrote, “It seems clear, however, that AlamedaFTX’s Proposal, which was made in contravention of the proposed Bidding Procedures, was designed to generate publicity for itself rather than value for Voyager’s customers.”

“AlamedaFTX essentially proposes a liquidation where FTX serves the role of liquidator. The “fair value” of Voyager’s cryptocurrency assets and loans is subject to negotiation with AlamedaFTX,” the lawyers wrote.

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The Toronto-based lender filed for Chapter 11 bankruptcy in New York late Tuesday.

Crypto lender Voyager Digital filed for bankruptcy late Tuesday, becoming the second high-profile crypto firm to do so in recent days.

The Toronto-based Voyager filed for Chapter 11 bankruptcy protections Tuesday in the Southern District of New York, estimating that it had more than 100,000 creditors and somewhere between $1 and $10 billion in assets. It also recorded the same range for its liabilities.

The company believes that “funds will be available for distribution to unsecured creditors,” according to the filing.

Voyager Digital Holdings, Inc., Voyager Digital, LLC and Voyager Digital Ltd. all filed for bankruptcy.

Crypto companies – and lenders in particular – have faced solvency issues in recent weeks, with several stopping customers from withdrawing their funds. Celsius kicked off this trend last month, announcing in mid-June that it would suspend withdrawals. CoinLoan, CoinFLEX and Voyager itself all announced restrictions or outright halts on withdrawals in recent days.

Voyager joins Three Arrows Capital in filing for bankruptcy. Three Arrows, however, filed a Chapter 15 petition tied to an ongoing liquidation effort ordered by a court in the British Virgin Islands.

According to writer Frances Coppola, Voyager’s loan book accounted for nearly half of its total assets, and nearly 60% of that loan book was composed of loans to Three Arrows.

In a statement posted online after this article was published, Voyager CEO Steven Ehrlich said reorganizing the company “is the best way to protect” the company’s assets, and pointed the finger at Three Arrows for some of its woes.

Following that statement, Ehrlich posted on Twitter that “Customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens.”

‘FDIC’ protections?
The filing comes as industry observers increase their scrutiny of Voyager’s business practices, particularly how the Canadian-listed firm said in marketing materials that investors’ deposits were protected by Federal Deposit Insurance Corporation (FDIC) insurance.

While FDIC insurance would indeed protect bank-held cash deposits up to $250,000, it would not cover cash converted to stablecoins. Commentators including Coppola have called Voyager’s marketing around its handling of deposits misleading.

Moreover, the FDIC insurance kicks in in the event of a bank failure – in this case, Voyager was banked by Metropolitan Commercial Bank. There is no protection in the event of a Voyager failure.

Creditors
According to the filing, Voyager Digital, Ltd.’s equity holders include Alameda Research Ventures LLC and Alameda Ventures Ltd., two companies associated with Sam Bankman-Fried, the founder of crypto exchange FTX who has extended credit lines or otherwise bailed out other crypto companies.

Voyager also owes Google nearly $1 million, according to the filing.
Voyager’s stock, already battered by the crypto market selloff, was trading at 27 cents at market close Tuesday, giving the company a market cap of $65 million Canadian dollars (around $50 million USD). That’s smaller than the $75 million unsecured loan issued by Alameda Research, according to the bankruptcy filings.

The stock traded above $20 last November, but fell below a dollar last month.

Voyager also claimed in its blog post that it had $110 million in cash, $350 million in cash at Metropolitan, $1.3 billion in crypto and was owed $650 million from Three Arrows. It did not say what specifically the liabilities are.

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