Voyager: Bankman-Fried, Crypto’s ‘White Knight,’ Is Flying a False Banner

An offer by Sam Bankman-Fried’s FTX cryptocurrency exchange to give customers of bankrupt crypto lender Voyager Digital early access to their funds is really a “low-ball bid dressed up as a white knight rescue” that would cost them money in the long run, the firm’s lawyers said on Sunday (July 24).

Bankman-Fried, a top crypto billionaire thanks to his ownership of FTX and its American offshoot, FTX US, as well as investment firm Alameda Research, offered a $550 million loan to Voyager in late June, before it entered Chapter 11. He pitched the loan as one of several extended because he felt a “responsibility” to step in and attempt to stop a domino effect of insolvencies resulting from the $48 billion collapse of a stablecoin and subsequent failure of crypto hedge fund Three Arrows Capital.

See also: Sam Bankman-Fried’s Buyouts Aren’t Stopping Crypto’s Dominoes From Falling

Voyager’s angry response to the offer echoes one by investors who backed crypto lender BlockFi, which found itself in the same position as Voyager. BlockFi accepted a linen of credit worth $250 million from FTX that gave the exchange the ability to buy the company at what one investor called “essentially zero price,” wiping out existing shareholders.

Read more: Crypto Companies Seeking Saviors Find Wolves in Sheep’s Clothing Instead

BlockFi CEO Zac Prince on July 1 said a few days later that the final deal was for a $400 million line of credit, with the ability to buy the firm for “up to $240M based on performance triggers.” BlockFi did avoid bankruptcy, however.

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Late Friday, FTX announced an offer Bankman-Fired said would provide Voyager customers whose funds are stuck in the bankruptcy proceedings “a better way to resolve an insolvent crypto business — a way that allows customers to obtain early liquidity and reclaim a portion of their assets without forcing them to speculate on bankruptcy outcomes and take one-sided risks.”

In short, Alameda would buy all of Voyager’s digital assets and digital asset loans — except for the Three Arrows Loan — for “immediately available cash at fair market value” and allow Voyager customers to either take cash or reinvest in digital assets on FTX with no trading fee. They would still have rights to any other assets that that come out of the Voyager bankruptcy. FTX also said it would write off the value of its own $75 million loan claim on Voyager.

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

The offer would exclude all of Voyager’s cash assets but would include its customer information as well as intellectual property and trademarks — to which it doesn’t “ascribe independent value.”

FTX asked for a response by July 30 and noted that the U.S. Bankruptcy Court for the Southern District of New York would have to approve the offer.

On a Twitter thread, Bankman-Fried argued that a long, drawn-out bankruptcy proceeding could potentially take years, during which “various bankruptcy agents are slowly bleeding the customer’s frozen assets dry with consulting fees.”

Not so fast

In a July 24 court filing, Voyager’s attorneys responded angrily to the offer, saying Bankman-Fried’s offer “was designed to generate publicity for itself rather than value for Voyager’s customers,” and said that it was “highly misleading” and would have “the effect of chilling bidding” from the more than 80 investors the firm had solicited bids from in its own reorganization plan.

That would keep the firm in business and provide other benefits to customers whose funds are frozen, including Voyager’s own native token, VGX.

That plan, it said “is capable of delivering far more value to customers than the AlamedaFTX proposal—which transfers significant value to AlamedaFTX, and completely eliminates the value of assets that are of no interest to AlamedaFTX.”

Among other things, it said, the cash option FTX proposed would potentially subject Voyager customers to capital gains taxes — although almost no one who invested since the beginning of 2021 is in any danger of a capital gain at present.

“No customer will be made whole under the Proposal, nor will any cryptocurrency be returned to customers under the Proposal,” it added. That includes value of the VGX token — its market capitalization was $118 million on July 25 — which Voyager’s lawyers say would be wiped out.

It also took exception to the zero value ascribed to Voyager’s brand.

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