In Voyager Bankruptcy, Crypto Trading Firma is a creditor, shareholder, and borrower

Crypto Trading Alameda Research Provides Emergency Lines of Credit to Now Bankrupt Crypto Lender Voyager Digital Ltd.

in which it has a minority stake. Bankruptcy filings show that Alameda was also a customer.

Alameda, founded by crypto billionaire Sam Bankman-Fried, has borrowed $376.8 million in cryptocurrency from Voyager, filings in New York bankruptcy court show, paying rates between 1% and 11.5%.

Adam Levitin, a professor of law at Georgetown University, said Alameda “appears to wear every potential hat in Voyager’s bankruptcy” as a creditor, shareholder and borrower. “There is a general phenomenon of a lot of recycled capital within cryptocurrencies, and this is an example of that.”

In an interview with mr. Bankman-Fried said that Voyager had loaned money to Alameda as part of its normal course of business, and that it had nothing to do with the $75 million that Alameda recently loaned to Voyager to ease the lender’s short-term liquidity crunch.

“The money lent to Alameda is money that will eventually be returned, presumably to be used to pay off customers,” he said.

When crypto lending platform Celsius froze user accounts amid a drop in valuations, it sent ripples across the industry and raised questions about what happens to user assets if a cryptocurrency files for bankruptcy. WSJ’s Vicky Ge Huang explains. Image caption: Jordan Crans

The close ties between crypto companies resonate across the industry. Voyager’s bankruptcy was accelerated by the bankruptcy of crypto hedge fund Three Arrows Capital – Voyager’s largest borrower, owing more than $650 million to the lender. Three Arrows defaulted on the unsecured loan on June 27. The Singapore-based hedge fund was ordered to liquidate in the British Virgin Islands and seek protection from creditors in the United States on Friday.

More than $100 million in losses in Voyager’s bankruptcy will likely remain with Alameda. The company lent Voyager $75 million worth of stablecoins under a credit facility that included $200 million in cash, USD and 15,000 bitcoin. $75 million is the maximum amount that can be withdrawn in a 30-day period.

Hong Kong-based Alameda has also made equity investments in Voyager totaling $110 million over the past several months. Equity and lines of credit will be wiped out under Voyager’s restructuring plan.

the master. Bankman-Fried acknowledged that Voyager’s bankruptcy filing was unfortunate for Alameda, but added that an accidental loss was to be expected when making quick investments in distressed assets. the master. Another Bankman-Fried company, cryptocurrency exchange FTX, has backed another crypto lender, BlockFi, to fund the crypto-equivalent of operating the bank.

“If your strategy for trying to extend the lifeline of companies in need results in you never having to do so with a company filing for bankruptcy, you probably weren’t doing your job.” Bankman Fried said.

Many of Voyager’s own investments as a cryptocurrency lender have been in the form of loans to other crypto companies. In addition to Three Arrows and Alameda, Voyager has loaned $17.6 million to Genesis Global Trading Inc. At a rate of 4% to 13.5%, Voyager court papers show. I lent $27.3 million to Wintermute Trading Ltd. At a rate of 1% to 14%, and $34.4 million to Galaxy Digital at 1% to 30%. Tai Mo Shan Ltd., a subsidiary of Jump Trading Group, borrowed $13.8 million from Voyager at a 10% rate, according to court filings.

Galaxy Digital and Genesis also borrowed from embattled crypto lender Celsius Network LLC. Celsius last month hired lawyers to restructure after freezing clients’ accounts.

Voyager is a large institutional lender to cryptocurrency trading companies known as market makers, which use algorithms to continually buy and sell assets. They make money by collecting a small difference between the bid and offer price. Market making in cryptocurrencies is a capital-intensive process because companies need to place digital currencies on different exchanges, which leads them to borrow those currencies from lenders.

After Celsius’ client accounts were frozen and Three Arrows slipped into liquidation, several lenders, including Voyager, began withdrawing their loans.

Marina Gurevich, COO of crypto maker Wintermott, said that Voyager has recalled most of its loans to Wintermot, but Voyager has several outstanding loans that have yet to be recovered.

“While Three Arrows Capital has obviously defaulted, Wintermot, etc. [proprietary] The businesses on this list are waiting for the remainder of the loans to be drawn down.” Gurevich said. “Wintermute has already returned hundreds of millions of commitments to several lenders over the past two weeks.”

Cryptocurrency companies are struggling with a market crash that has wiped out $2 trillion in value since the market peaked in November.

Genesis, Galaxy Digital and Jump Trading declined to comment.

write to Alexander Osipovich at alexander.osipovich@dowjones.com

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