Voyager Digital account holders have been warned they should not expect to get all their crypto back as the company restructures after filing for Chapter 11 bankruptcy.
The company has said it expects account holders to be “impaired” by the bankruptcy process, meaning they won’t necessarily get back exactly what they are owed, reported Bloomberg.
The crypto lender intends to repay users in crypto, shareholdings, Voyager tokens, and recovery proceedings from Three Arrows Capital (3AC). Three Arrows owes Voyager more than $650 million.
The company said: “Customers with USD deposits in their account(s) will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.”
Therefore, recovery from 3AC, the biggest counterparty, and others that cumulatively owe around $1.12 billion in third-party loans, is expected to be a complex and protracted affair.
What will insurance cover?
Of the approximately $1.3 billion of crypto assets held by Voyager, court papers reveal that the holdings are not user wallet-specific. Instead, the platform keeps its account holdings as asset-specific under various assets like bitcoin and ether.
New York-chartered bank Metropolitan Commercial, which is a member of the Federal Deposit Insurance Corporation (FDIC), has clarified that “Voyager is responsible for maintaining records to determine the ownership and amount of each of its customer’s funds on deposit in the omnibus account.”
The statement comes after the crypto platform said it has $350 million of cash held in the For Benefit of Customers (FBO) account at Metropolitan Commercial Bank.
But, the bank has underlined: “FDIC insurance does not protect against the failure of Voyager, any act or omission of Voyager or its employees, or the loss in value of cryptocurrency or other assets.”
Under normal circumstances, the standard FDIC insurance coverage amounts to $250,000 per depositor for each account ownership category the bank has specified.
Meanwhile, Voyager Digital is facing an expedited delisting review at the Toronto Stock Exchange, days after the platform halted withdraws following the collapse of 3AC.
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