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Voyager Digital’s Bankruptcy Case: The First 3 Weeks


There is heightened public interest in what may be an increasing trend of digital asset bankruptcy filings and in the resulting legal and business issues which are both novel and complex. It’s in that vein, we provide this update on Voyager Digital (as we originally discussed here ).

Voyager Digital Holdings, Inc. and two affiliates filed for bankruptcy protection on July 5th with a proposed plan of reorganization in hand.  Below we provide a few updates from the early days of Voyager’s case.

  • While Voyager filed a proposed plan of reorganization (albeit lacking certain critical information) it has not yet filed a proposed disclosure statement, indicating that there will likely be further significant amendments to the proposed plan’s terms. The filing of a disclosure statement is often a clear signal that a case is wrapping up because it is the first step in the solicitation process that is required to confirm a plan of reorganization. Indeed, a disclosure statement must first be approved by the court before a court-supervised solicitation can begin. Only then, after a plan has been approved by necessary classes of creditors, can the company exit bankruptcy as a reorganized entity (if that is the outcome).  More on timeline toward confirmation below.     
  • Voyager recently filed a motion seeking approval of bidding procedures with respect to the potential sale of its equity or assets, including scheduling an auction.  The motion also seeks approval for a schedule for plan solicitation and confirmation.  The company explained that, as of last week, nearly 40 entities had entered into confidentiality agreements and were offered due diligence. Voyager requested that bids be delivered by August 26th and, if more than one qualified bid is submitted, an auction will be held on August 29th.  Voyager also seeks discretion to select a “stalking-horse” bidder to set a floor on valuation and as a baseline for other bids. With respect to a potential plan process, the schedule they requested included the following: (i) disclosure statement filed by September 7th, (ii) hearing on the disclosure statement on October 12th, and (iii) a confirmation hearing on November 23rd.  While this motion has not yet been approved and may also be further amended, the outcome of the sale process could affect plan confirmation timing – which Voyager hopes to accomplish by the end of the year.  However, this timing does not necessarily mean that creditors will receive distributions by the end of this year as the debtor will still need to conduct a claims reconciliation process and potentially initiate claw-back and other litigation, which may take a significant amount of time.
  • Voyager also filed a response to an unsolicited bid from AlamedaFTX, the holder of a $75 million claim against Voyager.  In the response, Voyager disparaged the offer as “not value maximizing” and not consistent with the proposed bid procedures. They also took the opportunity to state their opinion that AlamedaFTX’s claim is subordinated to customers (rather than pari passu as suggested by AlamedaFTX).  In another release, Voyager implied that the Voyager tokens have an aggregate value in excess of $100 million.  
  • Numerous customers have filed often heartbreaking letters, pleading with the court for the return of “their” cryptocurrency and explaining how they were led to believe that so-called “customer assets” were safe.  Some have expressed dismay regarding the proposed plan which offers customers some percentage of a reorganized Voyager’s equity and Voyager tokens, among other things.  They have also expressed concern that their recoveries would be based on the value of their accounts at the filing date, losing the benefit of any upturn the cryptocurrency markets. 
  • An Official Committee of Unsecured Creditors has been appointed, made up of 7 customers.  The Official Committee is tasked with representing the interests of general unsecured creditors generally and its legal and financial professionals are paid by Voyager’s estate.  The Official Committee will weigh in on the sale process and the proposed plan terms with the goal of maximizing recoveries to unsecured creditors.  Voyager has also sought approval of the engagement of special counsel on behalf of a special committee of Voyager’s board. The special committee was established to investigate “historical transactions” relating to Voyager and “investigate any potential estate claims and causes of action against insiders” of Voyager, including with respect to the loan to Three Arrows Capital.



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