Voyager — In the realm of cryptocurrencies, unsecured creditors are less prevalent than in traditional financial systems. Cryptocurrencies function on decentralized networks with no intermediaries that give unsecured credit. However, there are examples of unsecured lending in the bitcoin ecosystem.
Smart contracts enable lending and borrowing without collateral on Decentralized Finance (DeFi) networks. Lenders become unsecured creditors in these situations and stand the danger of default. They base loan terms on the borrower’s creditworthiness and reputation. It’s vital to highlight that unsecured crypto lending entails risks like default, smart contract weaknesses, and regulatory uncertainty.
While unsecured lending is becoming more common in the crypto realm, it remains a smaller market when compared to collateralized lending.
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A crypto creditor is a company or person who loans cryptocurrency to another party in return for collateral or interest payments. These lenders are crucial in facilitating loaning and borrowing operations in the bitcoin market. Voyager is one platform that allows for such operations.
Voyager is a cryptocurrency brokerage platform and digital asset wallet that provides customers with an easy-to-use interface for buying, selling, and trading multiple cryptocurrencies. It gives you access to a broad variety of cryptocurrencies, including major ones like Bitcoin, Ethereum, and Litecoin. Voyager’s standout feature is its clever order routing technology, which searches numerous exchanges for the best available trade rates, possibly saving consumers money on fees. Furthermore, Voyager provides interest-bearing accounts for various cryptocurrencies, allowing customers to earn interest on their cryptocurrency holdings.
The platform emphasizes security features such as cryptocurrency cold storage and two-factor authentication. Before using the platform’s services, users should check compliance with local legislation and become acquainted with Voyager’s terms, fees, and regulatory requirements.
Voyager filed for bankruptcy in July 2022, joining the early wave of high-profile crypto businesses, claiming more than 100,000 creditors and $1 to $10 billion in assets. The business also disclosed that it had exposure to the crypto hedge fund 3AC.
The company’s financial difficulties coincided with a time of crypto market sell-offs caused by the demise of TerraUSD and LUNA. Celsius Network, another cryptocurrency loan service, exacerbated the problem by halting operations and withdrawals in June. The measures had a domino effect throughout the market, revealing a liquidity issue faced by numerous high-profile companies, including:
- Genesis Trading
- Three Arrow Capital (3AC)
Voyager tried to attract buyers such as Binance US and FTX. The arrangement with the latter fell apart after Sam Bankman-Fried filed for Chapter 11 bankruptcy in November 2022, becoming the cryptocurrency industry’s greatest bankruptcy. Binance US backed out of a possible transaction in April 2023. The corporation emphasized the harsh regulatory environment in the United States.
The United States Bankruptcy Court for the Southern District of New York authorized a liquidation plan in May, allowing Voyager Digital to compensate consumers for $1.33 billion in digital assets. The procedure also entails the firm incurring large legal expenditures.
A committee representing Voyager’s unsecured creditors was charged $5.17 million in legal expenses during the bankruptcy saga. According to a recent court filing in the US Bankruptcy Court for the Southern District of New York, law firm McDermott Will & Emery stipulated the fee from March to May.
As a result of this, the entire cost of the credit committee’s legal costs from July 22, 2022 to May 18, 2023 was around $9 million of the under $16.5 million. The “blended hourly rate” for timekeepers was indicated as $1,026.76 in the filing.
According to reports last week, Kirkland & Ellis, Voyager’s law firm, invoiced the former broker $1.1 million in fees for services completed in April 2023.
A silver lining for legal firms
Terra’s company encountered an avalanche in 2022 when its stablecoin was depegged, resulting in an ecosystem collapse in May. As a result, a slew of firms declared bankruptcy, sparking an industry-wide credit constraint known as the “crypto winter.”
Companies that have been significantly impacted include:
However, there is a silver lining to the numerous failures: attorneys rushed to the rescue of companies, generating mouth-watering sums of money from legal fees. For example, in December 2022, Celsius’s attorneys together billed the business a whopping $52.8 million. The charge is valid from the date of filing through the end of October.
The most notable loss was definitely FTX, which caused the collapse of nearly 130 linked agencies. So far, it has racked up legal expenses of about $200 million for the seven months of assistance it has gotten since its bankruptcy filing in November.