Will I Get My Crypto Back From Voyager?

will i get my crypto back from voyager

The collapse of crypto lending platform Voyager Digital in July 2022 sent shockwaves through the crypto community. Over 1 million users were left wondering if they would ever recover any of the billions of dollars worth of crypto assets held by Voyager.

As 2024 begins, many Voyager account holders are still seeking clarity on what they can expect to recover. This article provides the latest information and analysis to help Voyager customers understand the bankruptcy process and estimate potential crypto recoveries.

Voyager Bankruptcy Overview

On July 1, 2022, Voyager Digital Ltd filed for Chapter 11 bankruptcy protection in the Southern District of New York. This followed the company suspending withdrawals, trading, and deposits on its platform on June 27 due to financial difficulties.

Voyager claimed assets and liabilities of $1 billion to $10 billion each in its bankruptcy filing. However, some estimates put total customer assets held by Voyager at over $5 billion before its failure.

The company blamed market volatility and the collapse of major crypto hedge fund Three Arrows Capital for its financial problems. Voyager had significant exposure to 3AC, with over $650 million reportedly loaned to the failed hedge fund.

Voyager’s goal in bankruptcy is to restructure and emerge as a reorganized entity. Whether customers get all, some, or none of their crypto assets back depends on the outcome of the bankruptcy process.

Latest Developments in the Voyager Bankruptcy Case

As of early 2024, Voyager’s bankruptcy proceedings are still ongoing. Some key developments so far include:

  • Claims process underway – The bankruptcy court approved procedures for customers to submit claims in November 2022. The claims deadline is March 3, 2023.
  • FTX deal rejected – A proposed sale of Voyager assets to FTX was rejected by the court in November 2022 amid FTX’s own collapse.
  • New potential buyers – Voyager is reportedly in talks with several new potential buyers for its assets. Binance.US and Wave Financial are among the rumored bidders.
  • Creditor committee formed – A committee of major creditors was appointed to advocate for customer interests in the case. Members include Metropolitan Commercial Bank, Alameda Research, and the state of Washington.
  • Lawsuits pending – Class action lawsuits have been filed against Voyager by account holders seeking damages. The outcome of these cases could impact any funds available for repayment.

So while progress is being made in moving through the bankruptcy process, major uncertainties remain around what reorganization or sale plans will ultimately be approved by creditors and the court.

Factors That Will Determine Crypto Recoveries

There are several key factors that will ultimately determine how much, if any, crypto customers get back from Voyager:

Remaining Asset Value

The pool of assets remaining to distribute to creditors will be a driving factor in repayment percentages. Estimates have put Voyager’s crypto holdings between $1 billion and $5 billion heading into bankruptcy. However, the market value of digital assets has plunged significantly since those estimates.

The remaining value of assets like Bitcoin and Ethereum after liquidation will impact payouts. There are also reportedly significant liabilities owed to customers in stablecoins like USDC which may retain their value better.

Claims Size vs Asset Value

Another key factor is the total size of creditor claims compared to remaining assets. If claims greatly exceed assets, repayment percentages will suffer.

Voyager has said there were over 1 million funded customer accounts opened on its platform. Not everyone will submit claims, but the sheer number of potential claimants suggests claims may far surpass assets.

Priority Levels of Claims

Not all claims will be treated equally in bankruptcy. Claims are divided into different classes and prioritized based on factors like secured vs unsecured status.

For example, accounts with USD deposits may have priority over crypto-only accounts. Assets also may be distributed to higher priority creditors and legal fees first.

Costs of Bankruptcy Proceedings

The bankruptcy process itself carries high administrative costs from legal and advisory fees. The larger these costs grow, the less will be left for distributions to customers. Reports estimate Voyager is spending $1 million or more per week on advisors alone.

Litigation Outcomes

Legal action against Voyager from creditors and account holders could reduce funds available for distribution if damages or settlements must be paid out.

For example, if class action plaintiffs are successful in suits alleging Voyager misled consumers, those judgements would likely take priority over customer claims.

The interplay between all the above factors will determine the final math on Voyager customer recoveries. Unfortunately, the complex legal process means definitive answers are still a long way off.

Estimating Potential Crypto Recoveries

Until final repayment plans are approved, Voyager account holders are left guessing what they may get back from the failed crypto platform. Still, we can make some broad estimated guesses based on the situation.

Most legal and crypto restructuring experts suggest customers should temper expectations significantly. Full repayment is viewed as extremely unlikely. Estimates generally fall in the 10% to 50% range of crypto assets being returned.

As an example, if a customer held 1 Bitcoin and $1,000 worth of Ethereum on Voyager at the time it halted operations, potential outcomes could be:

  • High range recovery (~50%) – 0.5 BTC and $500 of Ethereum
  • Mid range recovery (~25%) – 0.25 BTC and $250 of Ethereum
  • Low range recovery (~10%) – 0.1 BTC and $100 of Ethereum

The high end of estimates represent an optimistic scenario where crypto assets hold their value and legal costs and priority claims do not excessively dilute the funds left for account holders. The low end represents a pessimistic scenario with further asset depreciation and high litigation expenses.

The most probable outcome likely falls somewhere in the middle, with customers getting back between 10% to 30% of their holdings. However these are just estimates and the actual amounts could still end up outside that range in either direction.

Timeframe for Recoveries

Even once amounts are determined, it will likely take an extended period for payments to be made to Voyager account holders. The bankruptcy process tends to move slowly.

Initial estimates suggest customers may have to wait until at least mid-2024 before receiving any reimbursement payouts. Even then, funds would likely be returned in multiple distributions spread over several years as assets are liquidated.

This means account holders need to be prepared for a long waiting period with no access to their crypto holdings or clarity on how much they will ultimately get back. The bankruptcy also means customers don’t have many options other than waiting it out.

Trying to buy back claims from other users has huge risks, as the account holder taking on the claims also takes on all the uncertainty around potential recoveries. The lack of a robust secondary market for bankruptcy claims again points to long timelines for resolutions.

How Repayment Prioritization May Impact Recoveries

Another factor that could significantly impact repayment amounts for different classes of customers is if certain claims get higher priority status than others.

While bankruptcy law establishes a basic hierarchy of claims, the specifics in Voyager’s case are still to be determined. It’s possible regulators may push for special protection for certain customers.

Potential priority differences that could emerge include:

  • USD deposits paid first – Fiat currency may take precedence over crypto assets
  • Small accounts favored – Accounts under $100k could be prioritized over larger ones
  • Crypto-only accounts lowest priority – Assets may go first to those with USD in addition to crypto
  • Special state-level protections – Certain states could lobby for priority treatment of their residents

Assigning different priority levels based on account type and location across Voyager’s broad international customer base adds more uncertainty over how much different users can expect back.

Those able to claim fiat deposits in addition to crypto may find themselves at the front of the line. Meanwhile, crypto-heavy power users could end up with the lowest recoveries depending on how priorities take shape.

Strategies for Maximizing Recoveries

Given all the uncertainty still surrounding the Voyager situation in 2024, there are a few things customers can do to position themselves as favorably as possible:

  • Understand claim process timelines – Be aware of critical deadlines for filing your claim and objections
  • Gather documentation – Have account statements, records of deposits, and other proof ready to support your claim
  • File in optimal jurisdictions – Research whether residency matters and file wisely
  • Participate in governance – Vote on restructuring plans that maximize recoveries
  • Monitor legal proceedings – Keep appraised of lawsuits that may impact payouts
  • Consult professionals as needed – Get advice from legal and financial experts on maximizing your claim

While there are limits to what individuals can control, taking the right steps can help optimize the eventual payout customers receive.Being an active and informed participant in the process is key.

What Happens to Crypto Left at Voyager After Bankruptcy?

Any cryptocurrency assets remaining at Voyager after final bankruptcy distributions will likely be turned over to a government-approved unclaimed property trust. The assets would then be held indefinitely waiting to be claimed.

Unclaimed crypto could potentially sit in trust for years if account holders fail to redeem their shares after the bankruptcy concludes and distributions are made. Only those who file valid claims would likely be notified when assets are ready for them to withdraw.

After a set period of inactivity, remaining unclaimed crypto assets could end up being liquidated and the cash proceeds turned over to state treasury departments. This makes it critical for customers to keep their contact details up to date and follow the claim process closely.

The outcome for any unredeemed assets at the end of Voyager’s bankruptcy will depend on specific details of approved plans, but loss to the state is a very real possibility for customers that fail to take action.

How Future Crypto Regulations Could Impact Recoveries

The regulatory environment for cryptocurrencies is still evolving quickly in 2024. Changes underway could potentially improve protections for consumers holding digital assets with third-party providers like Voyager in the future.

However, new rules are unlikely to impact the Voyager situation retroactively. The bankruptcy will play out based on existing regulations rather than pending policy changes.

Still, based on proposals being discussed, regulatory changes that could strengthen safeguards for crypto account holders include:

  • Custody requirements – Mandating providers hold full reserves of customer assets
  • Disclosure rules – More transparency on holdings and risks
  • Licensing standards – Stricter operational guidelines and oversight
  • Insurance mandates – Requiring coverage for lost customer funds
  • Conflict of interest limits – Restricting risky related-party transactions

Had rules such as these been in place prior to its collapse, Voyager may have been a safer custodian of customer crypto. Unfortunately for current account holders, new protections will likely come too late to impact their situation.

The key takeaway is regulatory reform could significantly improve the handling of consumer digital assets by companies like Voyager in the future based on the lessons of this failure.

What Voyager Means for the Future of Crypto Lending

The Voyager debacle is forcing some hard questions around the maturing crypto loan industry. The sector saw rapid growth as interest in digital assets boomed, but lax oversight and risk management practices have now been exposed.

It is likely that far stricter controls around capital requirements, transparency, risk modeling, and operations will now be imposed on crypto lending platforms. There will also be pressures to reduce conflicts of interest posed by relationships with counterparties.

Companies that survive may operate with tighter guardrails limiting their scale and profitability. But the tradeoff will be lower risks for depositors and greater sector integrity.

The shakeout should lead to more prudent custodians emerging, while also reducing moral hazard incentives for consumers who chased sky-high yields without regard for counterparties. Account holders may be more discerning of providers in the future.

While the Voyager failure caused major short-term pain, the crackdown on unsound practices it triggers can accelerate the maturation of crypto finance. The sector may emerge with a sounder base to responsibly custody assets and sustainably grow.

Key Takeaways for Voyager Customers

The Voyager bankruptcy case still has a long road ahead in 2024 before final outcomes become clear. But based on the landscape so far, here are some key takeaways for account holders seeking to recover their funds:

  • Expect a slow legal process with no quick fixes available
  • Anticipate significant haircuts to holdings, likely between 10% to 50% recovery
  • Prepare for a prolonged timeline measured in years, not months
  • Carefully follow claim procedures to maximize reimbursement eligibility
  • Monitor developments closely as more clarity emerges on recoveries
  • Be ready to vote on proposed plans in your best interest
  • Don’t count on new regulations to retroactively help the situation
  • Learn lessons on managing crypto counterparty risk for future decisions

The Voyager failure provides a cautionary example of the huge risks consumers take when handing over crypto assets to lending platforms. While investors chase yields, convenient services often obscure the absence of protections taken for granted in traditional finance.

The crypto community can only hope the lessons of this collapse will build a more robust ecosystem as adoption continues accelerating into 2024 and beyond.

Conclusion

The Voyager bankruptcy is a seminal moment highlighting risks in the evolving crypto sector. The ultimate impact on customers is still highly uncertain a year into proceedings.

Account holders hoping to recover some of their digital asset holdings face an extended process with many hurdles to clear. Outcomes will depend on factors from remaining asset values to legal costs and claim prioritization.

While customers will likely absorb significant losses, Voyager’s failure may catalyze constructive improvements in crypto custody protections, both through regulation and market discipline.

Voyager customers have a long journey still ahead in 2024. But by studying the landscape deeply, acting prudently, and participating actively, they can seek to emerge with their finances and future crypto decisions on stronger footing.

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