Casey Wagner

Ben Strack

<div id="highlights-block_62b9bc93a1801" class="highlights">
 <ul>
 <li>Voyager Digital’s exposure to 3AC could pose serious issues for the company, analysts say</li>
 <li>Three Arrows owes Voyager 15,250 bitcoins and $350 million in USDC</li>
 </ul>
 
</div>



Voyager Digital has issued a notice of default to Three Arrows Capital, as the company claims the hedge fund failed to make payments on a loan of 15,250 bitcoins, worth about $315 million on Monday, and $350 million in USD Coin (USDC).



&#8220;We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands,&#8221; Voyager CEO Stephen Ehrlich said in a <a href="https://www.prnewswire.com/news-releases/voyager-digital-provides-market-update-301575492.html" target="_blank" rel="noreferrer noopener">statement</a> Monday.



<a href="https://cms.blockworks.co/three-arrows-capital-brink-default-owes-voyager-657m/" target="_blank" rel="noreferrer noopener">Voyager</a>, a publicly-traded crypto platform founded in 2018, allows investors to trade more than 100 cryptoassets and earn up to 12% yield on various tokens.



Voyager’s platform continues to operate and fulfill customer orders and withdrawals, and its liquidity levels remain healthy, the company added.&nbsp;



As of June 24, 2022, Voyager had approximately $137 million in cash and owned cryptoassets on hand, the statement said.&nbsp;



“The Company also has access to the previously announced US$200 million cash and USDC revolver and a 15,000 BTC revolver from Alameda Ventures Ltd,” the statement said.&nbsp;



The notice of default comes as cryptocurrency industry members continue to evaluate the contagion risks following the apparent collapse of Three Arrows Capital and crypto lender <a href="https://cms.blockworks.co/celsius-enlists-advisers-for-potential-bankruptcy-according-to-wsj-report/" target="_blank" rel="noreferrer noopener">Celsius</a>.&nbsp;



“At the end of the day, what market participants should take away is that risk management is one of, if not the most, critical aspects of the crypto lending space,” Bill Barhydt, CEO of Abra, said. “It has been an issue in this space for years, and now we are seeing it first-hand with multi-billion dollar enterprises.”&nbsp;



Compass Point Research and Trading analysts Chris Allen and Alessandro Balbo said in a research note last week that Voyager’s exposure to Three Arrows Capital “raises survivability questions” for the company.



Three Arrows Capital has not publicly responded to the notice of default and did not immediately respond to Blockworks’ request for comment. A spokesperson from Voyager declined to comment further.



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Voyager Digital Issues 3AC Notice of Default on Loan Around $665M

<div id="highlights-block_62b36fa9dc584" class="highlights">
 <ul>
 <li>Voyager reveals Three Arrows Capital is at risk for defaulting on a $657 million loan</li>
 <li>The sell-off comes as senators weigh likelihood of a recession</li>
 </ul>
 
</div>



Crypto-related equities fell Wednesday — along with the broader market — as investors continue to parse contagion risks from lending firm Celsius’ <a href="https://cms.blockworks.co/celsius-says-it-needs-more-time-to-recover-financial-position/" target="_blank" rel="noreferrer noopener">liquidity crisis</a>. 



“Unfortunately, crypto equities are going to get penalized if either crypto or tech, or both, are down,” said David Tawil, president and co-founder of Prochain Capital. “However, I expect that the same will be true to the upside, eventually…if we are at or near a bottom in crypto and/or equities, I think that it&#8217;s a good entry point.”&nbsp;



Crypto broker <a href="https://www.investvoyager.com" target="_blank" rel="noreferrer noopener">Voyager Digital</a> led the decline, at one point losing as much as 60% during Wednesday’s trading session, following its disclosure that the company had <a href="https://cms.blockworks.co/three-arrows-capital-brink-default-owes-voyager-657m/" target="_blank" rel="noreferrer noopener">exposure to</a> potentially insolvent hedge fund Three Arrows Capital.



Voyager said Three Arrows currently has an outstanding loan of around $657 million, and the broker may issue a default if the full amount is not paid by June 27.&nbsp;



“This new revelation may have some investors wondering if these unscrupulous business practices between lender and borrower are commonplace in the industry, with further trouble yet to be announced,” said Josh Olszewicz, head of research at crypto fund manager Valkyrie Investments. “Multiple crypto lenders reporting liquidity issues over the past few weeks has also bred fear in the market broadly and led to a general contraction in available credit.”



Exchange Coinbase, business intelligence firm MicroStrategy and digital asset mining company Marathon Digital also all posted losses Wednesday. Coinbase at one point lost 7% while Microstrategy, which has been <a href="https://cms.blockworks.co/crypto-related-stocks-are-down-including-michael-saylors-microstrategy/" target="_blank" rel="noreferrer noopener">trending down</a> for several months, shed as much as 8.5%.



The sell-off comes as markets react to Federal Reserve Chair Jerome Powell’s testimony before the US Senate Banking Committee Wednesday. If interest rates increase at a steep pace too quickly, senators warned, a recession could be the result.&nbsp;



“It’s certainly a possibility, it’s not our intended outcome at all,” Powell said. &#8220;We are not trying to provoke, and I don&#8217;t think we will need to provoke, a recession.”&nbsp;



Market turmoil is not expected to let up until a shift in monetary policy occurs, analysts said.&nbsp;



“Fading stock market bounces will still remain the go-to trade on Wall Street until the economic data dramatically weakens and the Fed pivots so that they may ease up their tightening of policy strategy,” Edward Moya, senior market analyst at OANDA, said.



For crypto-related equities, specifically, Tawil added that contagion fears need to be eased first and foremost.&nbsp;



“The market definitely needs to see at least one week without any additional blow ups or fissures to declare that the contagion is over,” Tawil said. “Deleveraging will continue, and there will continue to be weakness in enterprises with remaining questions of stability, but the forced selling for this round will be over.”


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Voyager Digital’s 60% Slide Leads the Sell-off for Crypto Equities

<div id="highlights-block_626c46338f403" class="highlights">
 <ul>
 <li>Class action attorney Adam Moskowitz says he hopes the court resolves Voyager’s “continued attempts to simply walk away from our case”</li>
 <li>Original complaint filed in December alleged that the firm charged hidden fees and made false promises</li>
 </ul>
 
</div>



Attorneys have made fresh allegations in a class action lawsuit against Voyager Digital, claiming the cryptocurrency company sold unregistered securities in the form of interest-earning crypto accounts.



The complaint, filed Thursday in a Miami federal court by lawyers Adam Moskowitz and Stuart Grossman, includes a report detailing why the <a href="https://www.investvoyager.com/earn/" target="_blank" rel="noreferrer noopener">Voyager Earn Program</a> — allowing users to earn rewards on bitcoin, ether, USDC and other cryptoassets — should have been registered with the SEC.



The document also refutes Voyager’s claims that the Florida court does not have jurisdiction over the company, as the defendants of the class action complaint are vying for a jury trial.&nbsp;



Additionally, the document spotlights related actions taken by the SEC and state officials in the months after the original complaint <a href="https://cms.blockworks.co/voyager-estimated-quarterly-revenue-doubles-despite-lawsuit/" target="_blank" rel="noreferrer noopener">was filed</a> Dec. 24 on behalf of Florida resident Mark Cassidy.



Voyager competitor BlockFi said in February <a href="https://cms.blockworks.co/crypto-lender-blockfi-to-pay-100m-in-fines-to-us-regulators/" target="_blank" rel="noreferrer noopener">it would pay $100 million in fines</a> to the SEC and state regulators over allegations it illegally offered a high-interest yield product. 



Voyager CEO Stephen Ehrlich said during an earnings call that month that there are differences between <a href="https://www.investvoyager.com/vlp/" target="_blank" rel="noreferrer noopener">Voyager’s Loyalty Program</a>, which offers Voyager token holders rewards, and BlockFi interest accounts. 



The company <a href="https://www.investvoyager.com/pressreleases/voyager-news-release" target="_blank" rel="noreferrer noopener">said in a March 30 statement</a> it had received cease and desist orders from the state securities divisions of Indiana, Kentucky, New Jersey and Oklahoma relating to Voyager accounts that permit customers to earn rewards on their crypto balances.



“Voyager is in ongoing communications with these state regulators to better understand the terms in their respective regulatory orders and to clarify certain statements in the orders that Voyager believes are inaccurate,” the company said.&nbsp;



The original December complaint focused on allegations that Voyager charged hidden fees and made false promises to platform users. It claims that the firm’s bid-ask spread — the difference between the highest bid a buyer is willing to offer and the lowest bid a seller is willing to accept — “is kept intentionally wide.”



Cassidy’s lawyers said in January that litigation could result in more than $1 billion in compensation for Voyager users.



“This action is absolutely spurious and without any merit, whatsoever,” a Voyager spokesperson said in an email at the time. “We look forward to dealing with this matter through the appropriate legal channels.”



According to the amended complaint, Voyager previously claimed that the Florida court does not have jurisdiction over the company. But Voyager, listed on the Toronto Stock Exchange, sells its stock over-the-counter in the United States, including Florida, the document states. Thousands of the interest-earning crypto accounts are based in Florida, it adds.



Voyager also claimed they should not have to respond to the original complaint because Cassidy signed an “arbitration agreement,” Moskowitz told Blockworks.



The complaint notes that Janice Barrilleaux, Voyager’s chief administrative officer, called the January 2021 version of the company’s user agreement — the one Cassidy had agreed to — “grossly outdated.” David Brosgol, Voyager’s general counsel, later suggested “a significant overhaul” of the agreement, the document notes.



“We hope that after the court resolves Voyager’s continued attempts to simply walk away from our case, we can quickly seek certification for all of Voyager’s customers that all have the same rewards accounts, and finally require Voyager to comply with the state and federal rules,” Moskowitz said.



A Voyager spokesperson did not return a request for comment.



<a href="https://www.prnewswire.com/news-releases/voyager-digital-kicks-off-its-new-crypto-for-all-campaign-and-announces-key-business-milestones-301531596.html" target="_blank" rel="noreferrer noopener">The company reported</a> completing roughly 36 million consumer crypto transactions and reaching $5.5 billion in net new retail deposits since inception, as of March 31. Voyager’s next earnings call is slated for May 16.



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Updated Lawsuit Alleges Voyager Digital Sold Unregistered Crypto Securities

<div id="highlights-block_6182bac113a6d" class="highlights">
 <ul>
 <li>Voyager Digital recently reported that it expects consistent staking revenues of $40 million to $50 million per quarter </li>
 <li>CEO Steve Ehlrich said last week that the company intends to make NFTs on multiple platforms accessible to its users in 2022 </li>
 </ul>
 
</div>



Voyager Digital is integrating with Avalanche to include transfers and staking of the AVAX token into its brokerage platform, it announced Tuesday. The initiative will also give Voyager customers access to Avalanche-based DeFi tools and NFTs.&nbsp;



Voyager CEO Steve Ehrlich told Blockworks in an email that the company chose to partner with Avalanche because of the platform&#8217;s powerful ability to create secure and reliable applications. He called it “the fastest smart contracts platform in the blockchain industry,” noting that it processes thousands of transactions a second.



<blockquote class="wp-block-quote">“As the rise of gas fees continues to affect Ethereum and Ethereum-based applications, Avalanche makes a perfect partner for Voyager as it is cost-efficient and compatible with the Ethereum virtual machine,” Ehrlich explained. “Avalanche’s growing ecosystem is a great fit as we continue to expand the Voyager ecosystem toward DeFi and NFTs.”</blockquote>



Voyager will begin rolling out the integration with staking rewards and transfers of AVAX, he added, followed by DeFi, NFTs and other wealth-building tools.



The company partnered with Blockdaemon in April to enable its users to earn interest on a wider scope of coins offered on the platform. Voyager CFO Evan Psaropoulos noted <a href="https://cms.blockworks.co/voyager-looking-to-enter-nft-space-in-2022-ceo-says/" target="_blank" rel="noreferrer noopener">during a call on Oct. 29</a> that he expects to see consistent staking revenues of $40 million to $50 million per quarter, beginning this quarter.



&#8220;By enabling individuals to earn rewards on staked AVAX, deposit and withdraw AVAX, and easily access Avalanche DeFi and NFT products on the Voyager app, Voyager is allowing its users to tap into the rapidly growing Avalanche DeFi ecosystem directly from its trusted platform,” John Nahas, Vice President of Business Development at Ava Labs, said in a statement.&nbsp;&nbsp;



AVAX’s price was $70.96 as of 11:45 a.m. ET, according to <a href="https://www.coingecko.com/en">CoinGecko</a> &#8211; up nearly 8% in the last 24 hours. The coin’s market cap is now roughly $15.6 billion, the 13th-highest among crypto tokens.&nbsp;&nbsp;



Voyager has been busy recently, announcing last week <a href="https://cms.blockworks.co/a16z-invests-250m-in-alchemy-alameda-backs-voyager-with-75m/">a $75 million investment </a>from crypto market maker Alameda Research, which trades over $5 billion per day. The company also <a href="https://cms.blockworks.co/voyager-digital-partners-with-dallas-mavericks/">partnered with the Dallas Mavericks</a> as part of a five-year deal to make cryptocurrency more accessible through educational and community programs, as well as fan engagement promotions.&nbsp;&nbsp;



Ehlrich said during last week’s call that the company intends to make NFTs on multiple platforms accessible in 2022 to its users, which now total more than 2 million. He noted that Alameda Research, which has helped build out the Solana network, would be able to assist the firm in doing so.



<blockquote class="wp-block-quote">“While the management team has not defined the structure of this play on NFTs, the company&#8217;s network of sports and social influencers make Voyager a potential launch pad for social NFTs connected to these partners,” Compass Point Research &amp; Trading Analyst Chris Allen said in a Tuesday research note. “We note that the NFT marketplace, while still small relative to the greater cryptocurrency space, is becoming increasingly competitive with platforms such as Coinbase, Kraken, and FTX all entering the market.”</blockquote>



Nahas added that Avalanche would work with Voyager to add more products and services related to the Avalanche platform.



Avalanche <a href="https://cms.blockworks.co/avalanche-launches-200m-fund-to-support-ecosystem-growth/" target="_blank" rel="noreferrer noopener">announced the launch</a> of a new $200 million fund on Monday that would focus on growing decentralized finance, enterprise applications, NFTs and culture applications across its blockchain.&nbsp;



Ava Labs President John Wu <a href="https://cms.blockworks.co/das-2021-ava-labs-wu-says-economies-will-depend-on-next-gen-layer-1s/" target="_blank" rel="noreferrer noopener">said during Blockworks’ Digital Asset Summit</a> in September that the layer-1 protocols that are competing with Ethereum, such as Avalanche, will be the home of economies.



“You can have internet of value, you can have ecosystems, but you don’t have an economy unless transactions are easily done and affordably done,” he said.