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Bankrupt crypto lender Voyager to sell assets to Sam Bankman-Fried’s FTX

Sam Bankman-Fried, Founder and Managing Director of FTX Cryptocurrency Derivatives Exchange, speaks during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York, U.S., Wednesday, August 17, 2022.

Jeena Moon | Bloomberg | Getty Images

Customers of embattled cryptocurrency lender Voyager Digital may find some comfort in the news that FTX, the bitcoin exchange founded by billionaire Sam Bankman-Fried, is set to take over the company’s assets after winning a bankruptcy auction.

After several bidding rounds, FTX’s U.S. subsidiary was selected as the highest bidder for Voyager’s assets, the companies said in a statement late Monday. The offer was valued at approximately $1.4 billion, a figure that includes $1.3 billion for the fair market value of Voyager’s digital assets, plus an “additional consideration” of $111 million in anticipated incremental value. .

Voyager filed for Chapter 11 bankruptcy in July after a tumultuous drop in digital currency prices prevented it from repaying customer withdrawals. The company’s demise stems in part from the collapse of Three Arrows Capital, a so-called hedge fund that took out loans from other institutions, like Voyager, to make risky bets on tokens, including the collapsed stablecoin terraUSD. In June, 3AC defaulted on loans from Voyager worth $670 million.

Voyager hinted at a possible transition of its customers to FTX US, saying that the exchange “will allow customers to trade and store cryptocurrency after the company’s Chapter 11 business concludes.” The asset purchase agreement will be presented to the U.S. Bankruptcy Court for the Southern District of New York for approval on October 19. The sale of Voyager’s assets to FTX US is subject to a vote by creditors, as well as “other customary closing conditions,” according to the statement.

The move marks a potential step towards compensating Voyager users, who have few legal avenues to get paid for the crypto they stored on the platform before freezing customer withdrawals. In bankruptcy proceedings, clients of crypto platforms are treated as unsecured creditors, meaning they are not actually entitled to the crypto they purchased, and like other creditors, they should pass through the courts to try to recover their money. Creditors of Mt. Gox, which went bankrupt in 2014, are still waiting to be repaid.

Previously, Voyager claimed on its website and in marketing materials that user funds were protected by the Federal Deposit Insurance Corporation, but this was technically not true – Voyager’s cash deposits are held with the Metropolitan Commercial Bank , a New York-based lender. FDIC insurance only covers the event of bank failure, not Voyager. In July, the FDIC and the Federal Reserve sent Voyager a cease-and-desist letter ordering it to stop claiming it was FDIC-insured.

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During the crypto winter of 2022, Bankman-Fried became the savior for many companies that fell victim to the falling value of digital tokens and the resulting liquidity issues on their platforms. The 30-year-old quant trader extraordinaire turned crypto has been doing a good business amid the recent industry carnage.

In July, FTX signed a deal that gives it the option to buy lender BlockFi after providing a $250 million line of credit. Bankman-Fried says he still has plenty of money to spend on other deals. And it could soon receive even more, with sources saying CNBC FTX is raising an additional $1 billion from investors in an upcoming funding round.

– CNBC’s Kate Rooney contributed to this report