Voyager Digital Halts Trading and Withdrawals After Three Arrows Capital Default

In brief

  • Voyager Digital today announced that it has suspended withdrawals, deposits, and trading on its platform.
  • The firm issued a default notice to hedge fund Three Arrows Capital this week. Three Arrows reportedly owes Voyager about $646 million worth of crypto.

Crypto trading platform Voyager Digital announced today that it has temporarily halted all withdrawals, deposits, and trading due to “current market conditions,” Voyager CEO Stephen Ehrlich said in a press release.

Earlier this week, Voyager Digital issued a default notice to Three Arrows Capital, the crypto hedge fund whose apparent recent demise has sent shockwaves throughout the cryptocurrency industry, impacting other firms that had exposure to it.

“This was a tremendously difficult decision, but we believe it is the right one given current market conditions,” said Ehrlich. “This decision gives us additional time to continue exploring strategic alternatives with various interested parties while preserving the value of the Voyager platform we have built together.”

Voyager Digital said that it had loaned Three Arrows Capital 15,250 Bitcoin (currently $296.1 million) and $350 million in USDC stablecoins, totaling just over $646 million at present. On Monday, the platform issued the default notice to the apparently insolvent hedge fund. A default notice is a formal notice to a borrower that it has missed payments on a loan.

On Wednesday, a court in the British Virgin Island ordered the Singapore-based Three Arrows Capital to liquidate its assets to repay debts and financial obligations.

Three Arrows Capital, led by Zhu Su and Kyle Davies, had risen to prominence amid the crypto bull market of the last two years. However, the recent implosion of Terra (LUNA) and the UST stablecoin apparently dealt a significant blow to the fund, and other lenders like BitMEX, Finblox, and Deribit have taken measures to minimize losses and recoup debts.

Voyager’s announcement today follows a move on June 22 to slash the platform’s daily withdrawal limit by more than 50%, dropping from $25,000 per day for $10,000 for each customer. The firm’s stock price has fallen 26% today alone, and nearly 87% over the past month.

In today’s announcement, Voyager said that it had retained the services of financial advisors Moelis & Company and The Consello Group, and legal advisors Kirkland & Ellis LLP. “We are in discussions with various parties regarding additional liquidity and the go-forward strategy for the company,” the firm stated in a blog post.

As of June 30, Voyager Digital disclosed that it held $685.3 million worth of crypto assets, but that it had loaned out $1.12 billion worth. It also held $355.7 million worth of customers’ cash, and was holding nearly $168.7 worth of crypto collateral.

Earlier in June, crypto lending platform Celsius similarly paused withdrawals, citing “extreme market conditions” and a need to “stabilize liquidity.” Celsius still has yet to reverse course.

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