Bankrupt crypto lender Voyager to sell assets to Sam Bankman-Fried’s FTX

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Voyager, the bankrupt crypto lender started by former Uber Technologies Inc. Chief Executive Officer Travis Kalanick, agreed to sell its assets to Sam Bankman-Fried’s FTX Trust Co. in a $1.4 billion deal after court approval, according to two people familiar with the matter. The sale price of the company’s four main assets was determined through several auctions and pitches, with FTX ultimately winning out, said the people, who asked not to be identified discussing private details of the deal.

The announcement that FTX, the bitcoin exchange owned by billionaire Sam Bankman-Fried, is likely to acquire the company’s assets after winning a bankruptcy auction may provide some comfort to customers of struggling cryptocurrency lender Voyager Digital.

The firms said in a statement late Monday that FTX’s U.S. subsidiary was chosen as the top bidder for Voyager’s assets after multiple rounds of bidding. The bid was valued at around $1.4 billion, which includes $111 million in “extra consideration” in projected increased value in addition to $1.3 billion for the fair market value of Voyager’s digital assets.

In July, Voyager filed for Chapter 11 bankruptcy because it was unable to pay back client withdrawals due to a turbulent decline in the value of digital currencies. The failure of Three Arrows Capital, a purported hedge fund that borrowed money from other organisations like Voyager to make speculative bets on tokens like the defunct stablecoin terraUSD, contributed to the firm’s dissolution. 3AC missed payments on $670 million in Voyager loans in June.

By stating that FTX U.S. “would permit users to trade and store bitcoin after the end of the Company’s chapter 11 proceedings,” Voyager made a probable shift of its customers to the exchange known. On October 19, the asset acquisition agreement will be submitted for approval to the U.S. Bankruptcy Court for the Southern District of New York. According to the announcement, the transfer of Voyager’s assets to FTX U.S. is subject to a vote by creditors and “other standard closing conditions.”

The action is a potential start in compensating Voyager customers, who now have limited legal options for receiving payment for the cryptocurrency they had saved on the platform before it stopped allowing client withdrawals. Customers of cryptocurrency platforms are considered as unsecured creditors in bankruptcy proceedings, which means they are not really entitled to the cryptocurrency they purchased and must, like other creditors, seek restitution through the courts. Mt. Gox’s creditors, who lost everything in 2014, are still waiting for payment.

Voyager formerly said on its website and in marketing materials that consumers’ money was insured by the Federal Deposit Insurance Corporation, although this technically wasn’t accurate as Voyager’s cash deposits are held with Metropolitan Commercial Bank, a lender with headquarters in New York. Only the collapse of the bank is covered by the FDIC insurance; Voyager is not. Voyager received a cease and desist letter from the FDIC and the Federal Reserve in July telling it to stop making claims that it was insured by the FDIC.

Bankman-Fried has come to the rescue of several companies during the 2022 crypto winter as a result of the falling value of digital tokens and the ensuing liquidity problems at their platforms. The 30-year-old former quant trader who has become an expert in cryptocurrency has been looking for deals amidst the recent devastation to the sector.

A contract that FTX struck in July provides it the opportunity to purchase lender BlockFi in exchange for a $250 million line of credit. Bankman-Fried claims he still has enough of money to spend on more transactions. And according to insiders who spoke to CNBC, he may soon earn considerably more. In a forthcoming funding round, FTX is seeking to raise an additional $1 billion from investors.

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