It turns out that acting like a bank without any of the usual consumer banking protections is risky business – just ask investvoyager. Learn how the crypto lender went from loaning out millions in crypto to now seeking bankruptcy protection:
Voyager is casting itself as a victim of the cryptopocalypse, undone not by any direct exposure to the likes of Terra’s UST stablecoin and LUNA token, but merely through unlucky business partners.
To depositors, it looked an awful lot like a bank with a few twists. Up front, users deposited cryptocurrency rather than government fiat. Around the back, while Citibank or the teachers’ credit union might generate revenue by turning deposits into home loans, Voyager was engaged in much riskier lending.
But the lending business rallied like no other during the pandemic, when speculative mania from retail traders pushed everything from GameStop stock to dogecoin into silly season. From early 2020 to early 2022, the Voyager platform ballooned from 120,000 to 3.5 million users. Voyager benefited from low U.S. dollar interest rates and skyrocketing enthusiasm for the world’s hippest, hottest, most boom-and-bust prone risk-on asset.
One big holder of both GBTC and stETH was, you guessed it, Three Arrows Capital. 3AC’s loss of its entire $200 million initial stake in LUNA might not have been fatal if it hadn’t already been underwater on those other positions. But in any event, Three Arrows, for years one of the most respected trading firms in crypto, did the unthinkable: It simply disappeared.
But it wasn’t enough in the face of what Ehrlich describes as “an influx of customer withdrawals” that threatened “the Company’s ability to serve customers who remained on its platform.” As the market continued to fall, Voyager’s situation grew ever bleaker. On July 1, it froze all customer withdrawals and trading to “avoid irreparable damage to the Debtors’ business and ensure that its trading platform operated smoothly for all customers.
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