Cryptocurrency platform and lender Voyager Digital (VYGVF) – Get Voyager Digital Ltd Report ran afoul earlier in 2022 when the prices of the digital assets sunk and froze the assets of customers while its CEO allegedly made $31 million selling shares of the company.
While the crypto market wiped out $2 trillion in assets, Voyager CEO Steven Ehrlich allegedly cashed out of the company’s stocks before the lender filed for bankruptcy, according to the Canadian Securities Administration.
Shares of Voyager skyrocketed from $0.07 a share in October 2020 to $26 a share by March 2021. Bitcoin climbed by 455% and Ether jumped by 688% during the same period.
Ehrlich made his millions when he allegedly sold shares of the now bankrupt lender in February and March 2021 near their all-time highs.
Disposing of Shares
The CEO and his Delaware LLCs disposed of nearly 1.9 million shares in 11 separate sales from February 9, 2021 to March 31, 2021, totaling $31 million, according to data from the Canadian Securities Administration.
The three largest of the transactions netted almost $19 million from selling 1.4 million shares and were linked to a $50 million secondary offering by Stifel Nicolaus in February 2021.
By July, Voyager would file for bankruptcy after freezing the assets of their customers.
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The all-time highs set in November by the crypto market collapsed, wiping out $2 trillion.
Voyager’s Lending Business Led to Downfall
As a crypto trading platform, Voyager also provided loans and staking services, which are a type of rewards for holding certain digital coins.
The company’s lending business led to its downfall: Voyager appears to have loaned its clients’ funds to crypto hedge fund Three Arrows Capital, also known as 3AC.
This well-known fund, 3AC, defaulted in June on a loan of $667 million granted to it by Voyager. Three Arrows Capital was forced by a court in the British Virgin Islands to enter into liquidation.
The disaster led Voyager to suspend deposits, withdrawals and loyalty rewards on its platform.
“Customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens,” Ehrlich wrote on Twitter on July 6.
In its bankruptcy filing, Voyager said it had custody of $1.3 billion in customer crypto assets among its 3.5 million active users.
Voyager’s demise began when it promised massive returns on digital assets, but could not sustain its operations during the enormous losses sustained in the crypto market.
The FDIC later ordered Voyager to stop calling their products FDIC-insured, stating the claims “false and misleading.” Bank deposits are FDIC-insured unlike stocks and other alternative assets.