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Voyager filed for Chapter 11 bankruptcy a few days after halting withdrawals, claiming it was part of its reconstruction plan.
The US Bankruptcy Court in New York has approved for crypto brokerage firm Voyager to return up to $270 million in cash deposits to customers. According to The Wall Street Journal, the judge that presides over the case, Michael Wiles, authorizes Voyager to access customer funds held in a custodial account at Metropolitan Commercial Bank (MCM). The judge said the crypto firm had submitted a “sufficient basis” to support its contention that customers should have access to the custodial account.
Voyager filed for Chapter 11 bankruptcy shortly after halting trading, deposits, and withdrawals on its platform. The court filing and later revolution show that the company has about $1.3 billion of crypto assets on its platform. Voyager additionally has more than $350 million in cash at a For Benefit of Customers (FBO) account at MCB. Claims against crypto hedge fund Three Arrows Capital are worth over $650 million. Creditors were estimated at 100,000. Stephen Ehrlich, Voyager’s CEO, blamed the bankruptcy filing on the volatile crypto market. The CEO added that the Three Arrows Capital default also triggered the action.
Everyone, including investors, traders, and crypto companies, are having their share of the general crypto market crash. Crypto declines, coupled with the Terra blockchain collapse, led to the loss of about $40 billion in the industry. Crypto lending platforms BlockFi and Celsius were also affected by the market condition. Voyager filed for Chapter 11 bankruptcy a few days after halting withdrawals, claiming it was part of its reconstruction plan.
Voyager Customers to Receive $270M in Cash Deposits
Shortly after, Voyager requested permission to attend to withdrawals from its money held in MCB. The company asked that it pay cash deposits to clients from the custodial account. In a filing with the US Bankruptcy Court for the Southern District of New York, the crypto brokerage firm wrote:
“The debtors have determined, in their business judgment, that failure by the debtors to honor withdrawals any longer could materially harm customer morale during these Chapter 11 cases. Reinstating access to withdrawals will alleviate customer concerns that access to their cash held in the [Metropolitan Commercial Bank] accounts, and the integrity of the platform, is restored.”
Now, the court has approved that MCB releases the cash in the custody account. With this approval, Voyager can return the funds in cash deposits to customers.