A domino effect? Voyager Digital suspends trading and withdrawals

• Voyager blames 3AC’s loan payment default and harsh market conditions for its actions.
• Voyager claims 3AC owes it nearly $646 million in cryptos.

Crypto trading platform, Voyager Digital, announced the suspension of deposits, withdrawals, and trading on its platform. The platform issued an official statement concerning the matter through its CEO, Stephen Ehrlich. The company blamed the current downturn in the crypto market for its decision.

On Monday, Voyager Digital sent a default notice to Three Arrows Capital (3AC). However, 3AC failed to respond appropriately to the notice. The liquidation of the crypto hedge fund, 3AC, has had huge negative impacts on the crypto space.

An update to customers: https://t.co/myyrQ6gZi7

— Voyager (@investvoyager) July 1, 2022

More importantly, many firms exposed to it have had insolvency issues too. In the press release, Voyager Digital CEO said the decision to suspend trading, deposits, and withdrawals was difficult. However, the firm believes that’s the best step to take now based on recent events and the present market situation.

Details of 3AC’s debt to Voyager Digital

Ehrlich added that “the company will use this period to do what’s best for all concerned without eroding the values of the platform.” According to the crypto trading platform, 3AC owes it 15,250 BTC and $350 million worth of USDC.

Based on Bitcoin’s current price, 3AC owes Voyager Digital $296.1 million. Hence, the total amount 3AC owes Voyager Digital is more than $646 million. Earlier in the week, Voyager Digital sent a default notice to a now liquidated crypto hedge fund.

A default notice is an official letter to a borrower informing them about their missed loan repayments. On June 29, a British Virgin Island court ordered the liquidation of 3AC’s assets so that they could meet their financial obligations, including the repayments of their debts.

3AC became popular two years ago during the crypto bull market of that year. However, it is suffering the effects of the terra network crash in May. Most other crypto firms with huge exposure to the Terra network are also suffering the same fate.

Following 3AC’s insolvency issues, most other crypto lenders such as Finblox, Deribit, and BitMex have exited their positions in 3AC to minimize losses. Before this announcement, Voyager reduced its daily withdrawal limit by over 50 percent last week.

Each of its customers could only withdraw a maximum of $10,000 compared to the $25,000 they could withdraw previously. Voyager’s share price dropped by 26 percent a few hours after the announcement. The price has dropped 87 percent in the last 30 days before now.

Taking the best decision

Voyager’s press release notes that it will still be using the services of its current financial and legal advisors. According to the firm, its advisors will help greatly in deciding the best option for the company and possible liquidity injection.

A June 30 disclosure by Voyager Digital states that the firm holds $685.3 million in digital assets. Its debtors owe it $1.12 billion in cryptos. Furthermore, it holds $355.7 million in customer cash and about $168.7 million in collateralized crypto assets.

Early last month, crypto lending firm, Celsius, took similar action of suspending withdrawals. Celsius also cited similar reasons (harsh market situation) for its decision. Celsius hasn’t resumed withdrawals since then.