In a Press Release at 07:45 EDT today (June 27, 2022)
Voyager Digital Ltd. ("Voyager" or the "Company") (TSX: VOYG) (OTCQX: VYGVF) (FRA: UCD2) today announced that its operating subsidiary, Voyager Digital LLC, has issued a notice of default to Three Arrows Capital ("3AC") for failure to make the required payments on its previously disclosed loan of 15,250 BTC and $350 million USDC. Voyager intends to pursue recovery from 3AC and is in discussions with the Company's advisors as to legal remedies available.
[Voyager Digital. Voyager Digital Provides Market Update. (Accessed June 27, 2022)].
"A default notice is a formal response issued by a lender whenever a borrower has missed payments on their loan. Such a note doesn't ensure that the lender will be made whole, but it may mean they could soon collect the initial collateral" [Kelly, L. Voyager Digital Issues Three Arrows Capital With Default Notice. (Accessed June 27, 2022)].
Last week, Voyager gave 3AC deadlines for the repayment of its BTC and USDC loans. The firm requested $25 million to be paid last Friday and also requested the payment of the total balance Monday. However, despite the deadlines given, 3AC was unable to comply.
[Reguerra, E. Voyager Digital issues notice of default to Three Arrows Capital. (Accessed June 27, 2022)].
It is the failure by 3AC to make the aforementioned payments as demanded that provided the impetus for issuance of the notice of default. Likewise, it calls into question the overall solvency (or more likely insolvency) of 3AC.
Additionally this entire situation has caused Voyager Digital to feel the pinch. On June 22, 2022, Voyager's stock plunged 60% during trading hours to close at $0.5998 (an overall drop of 50.84% for the day), [See, Quarmby, B. Voyager’s 60% share price plunge leads sea of red for crypto stocks. (Accessed June 27, 2022)]. Then, on June 23, 2022, as a result of the 3AC contagion, Voyager Digital was forced to lower its daily withdrawal limit to $10,000 [See, Lang, H. Crypto broker Voyager Digital lowers daily withdrawal limits to $10,000. (Accessed June 27, 2022); see, also Pechman, M. Voyager Digital cuts withdrawal amount as 3AC contagion ripples through DeFi and CeFi. (Accessed June 27, 2022)].
"Voyager is now saying that 3AC has defaulted, and that it 'intends to pursue recovery from 3AC and is in discussions with the Company’s advisors as to legal remedies available” [Locke, T. Voyager Digital issues default notice to Three Arrows Capital for failing to repay its $660 million loan. (Accessed June 27, 2022)].
Voyager disclosed that the firm has $137 million in cash and crypto as of June 24, 2022... Apart from these, the company has employed global investment bank Moelis & Company as its financial advisers to help its efforts to stabilize amid its exposure to 3AC. According to Voyager CEO Stephen Ehrlich, the team is currently working to strengthen its balance sheets and pursuing other options to continue to comply with the liquidity demands of its users.
[Reguerra, supra].
As well, Voyager Digital has access to another $500 million representing the funds associated with its loan agreement with Alameda Research, for which it maintains it has only accessed $75 million worth of funds from Alameda. In today's press release, Voyager Digital assures "the platform continues to operate and fulfill customer orders and withdrawals" [Voyager Digital, supra].
Once a darling of crypto's raging bull market, 3AC, led by Su Zhu and Kyle Davies, has been hit hard by the recent crash. As the bear market deepened, kicked off by the implosion of Terra (another crypto project that 3AC had backed), various firms, including BitMEX, BlockFi, and Genesis Trading, liquidated 3AC's outstanding loans.
[Kelly, supra].
In a tweet dated June 14, 2022, 3AC co-founder, Zhu Su, stated:
However, interestingly, "he has not spoken a word over the ongoing issue since then" [24Talker. Voyager Digital issues Notice of Default to Three Arrows Capital. (Accessed June 27, 2022)].
Looks like another one bites the dust as the contagion claims an additional victim.