This is an unusual proposition.
But the proposal could bring some heartfelt comfort to clients of bankrupt crypto lender Voyager Digital.
After the cryptocurrency lender (a victim of hedge fund Three Arrows Capital or 3AC loan default) filed for Chapter 11 bankruptcy earlier this month, the latter did lose hope of recovering their assets/funds.
According to official documents from Voyager Digital, retail investors are not at the top of the list of secured creditors. Their claims are considered unsecured, meaning they’re not sure if they’ll be able to get their money back.
But something unusual has just happened. Young cryptocurrency billionaire Sam Bankman-Fried, founder of cryptocurrency exchange FTX.com, has proposed a restructuring plan that aims to allow Voyager Digital customers to recover some of their funds. The beauty of this proposal is that it will attract these customers to FTX.com at the same time.
Get their liquidity early
In fact, the offer is divided into two parts. Alameda, a trading company owned by Bankman-Fried, will buy all of Voyager Digital’s assets for cash, except for a loan to bankruptcy hedge fund 3AC.
Meanwhile, Bankman-Fried’s cryptocurrency trading platform, FTX, will offer Voyager Digital customers the option to receive early payments by opening an account on FTX. Any Voyager Digital customers who do not wish to open an account with FTX retain their rights in bankruptcy proceedings, but will not receive early cash for their claims through FTX.
The offer is non-binding and has not been accepted by Voyager Digital.
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“Under the joint proposal, Voyager customers will have the opportunity to open a new account with FTX with an opening cash balance funded by an early distribution of a partial bankruptcy claim,” FTX explained in a recent press release, which you can find here.
“Clients will be able to withdraw cash immediately or use it to buy digital assets on the FTX platform. Clients do not need to participate and participation in the joint proposal is entirely voluntary,” the company added.
Before the company filed for bankruptcy, Alameda had granted Voyager Digital a $75 million line of credit. As part of the new offer, Alameda will erase that claim.
This is a win-win model, as the offer provides Bankman-Fried and FTX with a positive and savior image, which will also allow it to win new customers. The offer is also an ideal advertisement for FTX at a time of renewed mistrust in the cryptocurrency industry. They will be seen as “good people”.
Bankman-Fried Power continues to grow
“Voyager’s clients did not choose to be bankrupt investors with unsecured claims,” said FTX CEO Sam Bankman-Fried. “The goal of our joint proposal is to help build a better way to address insolvent crypto businesses — one that allows clients to access early liquidity and recover some of their assets, without forcing them to speculate on the outcome of bankruptcy and take a one-sided approach Practice risk.”
Bankman-Fried has established himself as the new savior since the beginning of the liquidity crisis the crypto industry is currently experiencing, much like JPMorgan Chase was during the 2008 financial crisis. It thus expanded its powers to exit crypto lender BlockFi by bail, which gave it the option to acquire the platform. FTX is in talks to acquire South Korean cryptocurrency exchange Bithumb.
Bankman-Fried also became one of Robinhood’s largest shareholders. And the 30-year-old young billionaire isn’t going to stop there. He wants to continue to extend his power into an industry that likes to present itself as a decentralized antithetical to the traditional financial system.
“We could certainly see ourselves spending hundreds of millions of dollars more than we’ve had to date, and in some cases even more,” Bankman-Fried told CNBC on July 22.
According to Bloomberg, FTX is in discussions to raise new capital in order to achieve its ambitions.