Bankruptcy Court Says Voyager Digital Can Return $270M to Customers

Cryptocurrency firm Voyager Digital has received approval from the U.S. Bankruptcy Court in New York to return $270 million in cash to its customers, The Wall Street Journal (WSJ) reported.

Customers should be allowed access to a custodial account held at Metropolitan Commercial Bank, said the ruling of the judge overseeing Voyager’s bankruptcy, according to the report.

As PYMNTS reported July 6, Voyager, a crypto lender, filed for Chapter 11 bankruptcy protection July 5, telling the bankruptcy court for the Southern District of New York that it was “facing a short-term ‘run on the bank’” after a borrower defaulted on a $650 million loan.

Read more: Reckless Crypto Lending, Opaque Operations Paved Voyager Digital’s Path to Bankruptcy

The filing mentioned the inability of crypto hedge fund Three Arrows Capital — itself in bankruptcy — to repay its debt as well as the broader crash of the cryptocurrency market.

While the filing showed liabilities of $5.7 billion at the end of March, Voyager told the court that it had $1.3 billion in crypto assets on its platform and $350 million in the bank at which it held customer deposits, as well as $110 million in cash and crypto assets of its own.

The Federal Deposit Insurance Corporation (FDIC) issued Voyager a stern warning July 28 to stop “making false or misleading representations” implying that its customers’ funds are FDIC insured.

See more: FDIC’s Warning to Voyager Spotlights Broader Concerns about Insuring Crypto

An immediate concern alleged by the FDIC and Federal Reserve Board was that the firm had “stated or suggested on its website, mobile app and social media accounts that Voyager itself is FDIC-insured; customers who invested with the Voyager cryptocurrency platform would receive FDIC insurance coverage … [and that] the FDIC would insure customers against the failure of Voyager itself.”