Voyager Digital starts Chapter 11 reorganization process

Voyager Digital Ltd. started a voluntary Chapter 11 process, under which the company and its main operating units filed voluntary petitions for reorganization in the U.S. Bankruptcy Court of the Southern District of New York.

The move follows Voyager operating platform Voyager Digital LLC's suspension of trading, deposits, withdrawals and loyalty rewards due to prevailing market conditions. CEO Stephen Ehrlich said in a previous news release that the decision gives the company more time to explore "strategic alternatives with various interested parties." Voyager Digital LLC previously issued a notice of default to Three Arrows Capital Pte. Ltd. for failure to make the required payments on its previously disclosed loan of 15,250 bitcoin and $350 million worth of USDC.

The company also plans to seek recognition of its Chapter 11 case in the Ontario Superior Court of Justice.

The proposed reorganization will "resume account access and return value to customers," according to a July 6 news release. Under the plan, which is subject to change, given ongoing discussions with other parties, and requires court approval, customers with cryptocurrency in their accounts will receive in exchange a combination of crypto, proceeds from the Three Arrows recovery, common shares in the newly reorganized company and Voyager tokens. The plan contemplates an opportunity for customers to elect the proportion of common equity and crypto they will receive, subject to certain maximum thresholds.

Customers with dollar deposits in their accounts will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.

The company has more than $110 million in cash and owned crypto assets on hand, which will provide liquidity to support day-to-day operations during the Chapter 11 process, as well as more than $350 million in cash held in the For Benefit of Customers account at Metropolitan Commercial Bank. It also has approximately $1.3 billion in crypto assets on its platform, plus claims against Three Arrows of more than $650 million.

Voyager has engaged Moelis & Co. and The Consello Group as financial advisers, Kirkland & Ellis LLP as legal advisers, and Berkeley Research Group LLC as restructuring adviser.

The company also announced the appointment of four new independent directors: Matthew Ray at Voyager Digital Ltd., Scott Vogel at Voyager Digital Holdings Inc. and Jill Frizzley and Timothy Pohl at Voyager Digital LLC.

Ray is founder and managing partner of Portage Point Partners LLC, where he has served as chief restructuring officer, CEO, chairman and lead independent director, among other roles. Vogel sat on numerous boards of directors for financially distressed companies in a diverse set of industries, according to the release. Frizzley is experienced in corporate governance, has served on boards and has advised on corporate governance, restructuring, bankruptcies and M&A. Pohl has a background in corporate restructurings and financing, M&A, valuation, liquidity and balance sheet assessment and analysis, capital markets, corporate law, restructuring law, and litigation.