Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York, U.S., Wednesday, Aug. 17, 2022.
Gina Moon | Bloomberg | Getty Images
Customers of cryptocurrency lender Voyager Digital can take solace in news that FTX, the bitcoin exchange founded by billionaire Sam Bankman-Fried, is set to take over the company’s assets after winning a bankruptcy auction.
After several rounds of bidding, FTX’s US subsidiary was selected as the highest bidder for the Voyager assets, the companies said in a statement late Monday. The bid was valued at about $1.4 billion, a figure that includes $1.3 billion for the fair market value of Voyager’s digital assets, plus $111 million in “incremental consideration” in the form of expected incremental value.
Voyager filed for Chapter 11 bankruptcy in July after a sharp drop in the price of the digital currency failed to recoup the money that customers had withdrawn. The firm’s demise is partly linked to the collapse of Three Arrows Capital, a so-called hedge fund that borrowed from other institutions like Voyager to make risky bets on tokens — including the collapsed terraUSD stablecoin. In June, 3AC defaulted on $670 million in loans to Voyager.
Voyager hinted at a possible transition of its customers to FTX US, saying the exchange “will allow customers to trade and hold cryptocurrency following the conclusion of the company’s Chapter 11 proceedings.” The asset purchase deal will be submitted to the US Bankruptcy Court for the Southern District of New York for approval on October 19. The sale of Voyager’s assets to FTX US is subject to a vote of creditors as well as “other customary closing conditions.” “, the statement says.
The move marks a potential step toward compensating Voyager users, who have few legitimate ways to get paid for the crypto they stored on the platform before it froze customer withdrawals. In the bankruptcy process, customers of crypto platforms are treated as unsecured creditors, which means that they are effectively not entitled to the crypto they purchased and, like other creditors, will have to go to court to try to get their money back. Creditors of Mt. Gox, which went down in 2014, is still waiting to be paid.
Voyager has previously claimed on its website and in marketing materials that user funds are protected by the Federal Deposit Insurance Corporation, but that’s technically not the case — Voyager’s cash deposits are held at Metropolitan Commercial Bank, a New York lender. FDIC insurance only covers the event of a bank failure, not Voyager. In July, the FDIC and the Federal Reserve sent Voyager a cease and desist letter ordered to stop claiming to be FDIC insured.
Crypto winter 2022, Bankman-Fried became the savior of many firms that fell victim to the fall in the value of digital tokens and liquidity problems on their platforms. The 30-year-old quant trader turned cryptographer extraordinaire was shop for great deals amid recent carnage in the area.
In July, FTX signed a deal that gives it the option to buy lender BlockFi after providing a $250 million credit line. Bankman-Fried says he still has plenty of money to spend on further deals. And it could soon get even more, sources told CNBC FTX raise another $1 billion from investors in a future round of funding.
— CNBC’s Kate Rooney contributed to this report.