Voyager Digital to Issue a Notice of Default to Three Arrows Capital, Share Price Tanks 50%

UTC by Bhushan Akolkar · 3 min read
Voyager Digital to Issue a Notice of Default to Three Arrows Capital, Share Price Tanks 50%
Stephen Ehrlich, Voyager Digital CEO. Photo: Voyager / Facebook

Voyager Digital has asked Three Arrows Capital for the entire repayment of its loaned amount of $350 million in USDC stablecoin along with 15,250 Bitcoins (BTC). Failure to do so will result into a notice of default.

Digital asset brokerage platform Voyager Ditial is in a very dire situation amid its exposure to crypto hedge fund Three Arrows Capital (3AC), which is facing insolvency. On Wednesday, June 22, Voyager announced that it might issue a “notice of default” to 3AC if it fails to repay its loan.

As of now, Voyager’s exposure to 3AC is a staggering $350 million in USDC stablecoin along with 15,250 Bitcoins (BTC). The company has made an initial request of $25 million in repayment by June 24, 2022. However, Voyager is seeking the rest of the repayments for its entire USDC and BTC balance by June 27.

Voyager Digital said that if 3AC fails to repay this amount by the due dates, they would regard it as a default. The crypto brokerage platform said that it is currently in talks with its legal advisors about other available options.

As per the WSJ report, Three Arrows Capital (3AC) has suffered a major liquidity crisis amid the recent market correction. As a result, they have suffered a legal and financial advisor to seek a way out. Earlier this year in February, 3AC had invested $200 million LUNA which is now into dust after the Terraecosystem collapse.

Amid the crypto market crash earlier this month, Three Arrows Capital faced $400 million in a forced liquidation. Thus, the crypto hedge fund is reportedly on the verge of insolvency.

Apart from Voyager Digital, 3AC has reportedly failed to make payments to another crypto lender BlockFi. Although BlockFi didn’t explicitly confirm this, its CEO Zac Prince tweeted: “large client… failed to meet its obligations on an overcollateralized margin loan. We fully accelerated the loan and fully liquidated or hedged all the associated collateral”.

Voyager Shares Tanks Over 50%

Following the news, shares of Voyager Digital tanked more than 50% on Wednesday, June 22, closing at $0.76. Analysts have urged caution and asked investors to avoid fresh buying until more clarity emerges. In a note to clients, Chris Allen, an analyst with boutique investment bank Compass Point said:

“The 3AC exposure raises survivability questions for VOYG. With 3AC contemplating asset sales or a rescue by another firm , it is unclear if the fund will be able to repay its outstanding loans and even if it somehow has the capacity to do so, we would expect it to take an extended amount of time.”

Sam Bankman-Fried Comes to the Rescue

FTX chairman Sam Bankman-Fried has been holding troubled crypto lending platforms BlockFi and Voyager. His company Alameda Ventures Ltd. has extended a credit facility that will help Voyager to meet its liquidity needs. The press release from Voyager noted:

“VDH entered into a definitive agreement with Alameda for a US$200 million cash and USDC revolver and a 15,000 BTC revolver (the “Loan”). As previously disclosed, the proceeds of the credit facility are intended to be used to safeguard customer assets in light of current market volatility and only if such use is needed. Alameda currently indirectly holds 22,681,260 common shares of Voyager”.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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