The Bankruptcy of the Canadian Digital Asset Lender
At the beginning of July 2022, the prominent Canadian digital assets lender Voyager Digital filed for bankruptcy, citing market volatility and the unexpected collapse of Three Arrows Capital. Just a few weeks before the filing, it froze withdrawals, trading, and deposits on its platform. On July 13, 2022, one month after announcing the suspension of all withdrawals, swaps, and account transfers, Celsius and its connected entities filed for bankruptcy.
Celsius, Voyager, and Three Arrows have collapsed financially. Risky investments, DeFi vulnerabilities, and the crypto collapse led to the insolvency of each company.
In its bankruptcy petition, Voyager disclosed that it has more than $110 million in cash and digital assets worth approximately $1.3 billion. These assets include claims against the crypto hedge firm Three Arrows Capital totalling over $650 million. The failure of the Voyager platform wreaked havoc on the crypto sector as a whole. Despite its popularity, the platform failed due to questionable business decisions, such as providing customers funds to 3 Arrows Capital as an unsecured loan. This move has financially destroyed thousands of retail investors worldwide.
Voyage to the Bank: Where is the Money?
According to Coppola, Voyager's loans comprised nearly half of its total assets, and approximately sixty percent of that loan book consisted of loans to Three Arrows. The filing came out in public at a time when industry experts are increasing their scrutiny of Voyager's business practices, specifically how the Canadian-listed firm stated in marketing materials that investors' accounts were insured by the Federal Deposit Insurance Corporation (FDIC). FDIC insurance would protect bank-held cash deposits of up to $250,000.
With Voyager exercising negligence and retail investors are asking, “Where is my money?”. Everyone is thinking of ways to fill the hole in the balance sheet of these DeFi players. But the question is how? With bankruptcy proceedings taking their own time, the answer may not be that simple.
Ethos Comes to the Rescue of Voyager Creditors and Token Holders by Offering a Recovery Token Program
Ethos announced a recovery token programme for Voyager's former users. VGX holders and creditors can claim ETHOS tokens with proof of a valid claim. While there are no assurances by Ethos, such recovery tokens have assisted victims in repairing harm. For many, the losses have been excruciating, but the Ethos founders provide a glimmer of optimism and a new way for the whole cryptocurrency sector.
Voyager and Ethos once collaborated on projects. Voyager used Ethos' system for years at first to sign up new customers and manage their cryptocurrency assets, processing more than $5 billion through Ethos' crypto rails. Additionally, after the organizations merged in 2019, Ethos amalgamated into Voyager. Voyager declared bankruptcy about 18 months after the original Ethos team left the board due to disagreements over the need for more decentralized services and other aspects of the business concept. A group of eight seasoned crypto specialists and former Ethos developers will soon release Ethos 2.0. It will be a decentralised, self-custody substitute for centralised trading apps like Voyager.
Vested Interest Disclosure: The author is an independent contributor publishing via our
How is it going to work?
The Ethos team will offer a free recovery token programme to users impacted by Voyager's bankruptcy shortly after Ethos 2.0 launches. The Ethos self-custody platform's utility asset, ETHOS tokens, is available to eligible users. VGX holders will receive 10% of the ETHOS token supply based on a future blockchain snapshot. If Voyager creditors submit proof of claim, a comparable sum will be paid proportionately.
Creditors can use the Ethos platform at www.ethos.io to register their claims with supporting documentation. A snapshot will be made of VGX holders, and tokens will then be distributed via the Ethos app. The VGX community, which the bankruptcy process has mostly marginalized, will find optimism in that process. Live Trading eliminates the possibility of a centralized meltdown by enabling large-volume, best-execution trading directly from a vault.
What Is Ethos?
Ethos is a blockchain platform that is user-powered. Ethos aims to create open, secure, and equitable decentralized financial services for everyone. Through previous cryptocurrency projects, the Ethos team has a proven track record of generating billions in enterprise value. To say goodbye to private keys and seed phrases, the next-generation Ethos platform is backed by exceptional Magic Key security that includes MPC technology.
Don’t forget to like and share the story!
Image credits: Eugene Aikimov and Aditya Chinchure.