Voyager Withholds $445 Million From Creditors for FTX Fight (1)

Voyager Digital Ltd. agreed to reserve $445 million in case it loses a bankruptcy court fight with FTX Group, instead of quickly handing the cash to creditors under the crypto firm’s plan to end its insolvency case, court papers show.

Under a deal between the two bankrupt companies, FTX will drop its demand that Voyager repay certain loans, but will continue to press for the return of as much as $445 million worth of cryptocurrencies. The companies will try to resolve the cryptocurrency fight in mediation.

The agreement lays out a plan for untangling cryptocurrency loans made last year between the two firms as the industry fought to survive the decline of digital assets, known among insiders as crypto winter. The dispute reflects the murky connections among various crypto exchanges that have complicated reorganization efforts in some of the biggest crypto bankruptcy cases.

Before Voyager went bankrupt in July, FTX had borrowed hundreds of millions of dollars worth of crypto, but also agreed to let Voyager borrow as much as $500 million of cash and digital assets, according to court documents.

After Voyager entered bankruptcy, FTX returned the crypto it had borrowed. Around that time, FTX offered to rescue Voyager by buying the crypto exchange.

Eventually FTX went bankrupt itself and backed away from its rescue proposal. Voyager was forced to find a replacement buyer for its assets after concluding FTX wouldn’t close the planned $1.4 billion sale.

On Thursday, Voyager will ask a bankruptcy judge in Manhattan to approve a payout plan that would repay creditors about half of what they are owed, according to court documents.

The collapse of FTX, which was founded by accused fraudster Sam Bankman-Fried, reverberated through the industry, playing a role in the bankruptcy case of crypto lender BlockFi Inc.

Read more: Bankman-Fried Sees Third FTX Leader Plead Guilty in Fraud Case

Crypto hedge fund Galois Capital had $40 million to $50 million of exposure to FTX, with “significant” funds stuck. And brokerage Genesis needed a $140 million infusion from its parent company after it disclosed $175 million in funds locked in a FTX trading account.

Celsius Network LLC had entanglements with FTX totaling $3.6 billion early last year, Chief Restructuring Officer Chris Ferraro said in a November bankruptcy court hearing. That figure eventually fell to about $13 million as Celsius worked to get away from third-party crypto platforms.

The case is FTX Trading Ltd., 22-11068, U.S. Bankruptcy Court for the District of Delaware.

(Add details starting in fourth paragraph, includes Voyager’s proposed payout plan in seventh.)

To contact the reporter on this story:
Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editors responsible for this story:
Claire Boston at cboston6@bloomberg.net

Jeremy Hill, Steven Church

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