Lawyers representing the Official Committee of Unsecured Creditors (UCC) of Voyager Digital have raised objections to sweeping legal immunity being planned for the firm’s senior executives.
Last month, the Sam Bankman-Fried (SBF)-led crypto exchange FTX won the bid for Voyager for $1.4 billion, beating Binance in the race. However, the Voyager management has reportedly added immunity from future lawsuits for its top executives as a precondition for the deal to get through.
Creditor Group’s Objections
In a filing with the United States Bankruptcy Court for the Southern District of New York on Wednesday, they said the “broad releases” being offered to Voyager’s top executives are, in effect, aimed at shielding those who are “principally responsible” for the financial troubles the crypto firm is facing right now, media reports said.
The creditor group stressed that Voyager should explain better why its executives need to be protected from future lawsuits. The protection denies the creditors of the bankrupt company to receive more of their money back.
It further argued that its investigations into the circumstances leading to Voyager’s bankruptcy have revealed “sobering” details. Providing an exemption from lawsuits against the company’s top brass would prevent creditors’ legitimate claims against them.
The creditors are left with a “Hobson’s Choice,” the group said. Either they should accept the immunity clause and let the deal get through quickly so that they can redeem their investments, or they should oppose the deal, which will lead to costly delays and difficult litigation.
Meanwhile, an investigation by two members of Voyager’s board of directors is underway. If it concludes that certain company execs should be or could be sued for their role in its debacle, they will be removed from the proposed “broad releases,” the firm’s filings with the bankruptcy court revealed.
This investigation will also look into Voyager’s exposure to crypto hedge fund Three Arrows, which sunk with investors’ money amid the broad market crash, with a British Virgin Islands court ruling for its liquidation on June 27. After suffering huge losses from its exposure to Three Arrows, Voyager Digital filed for Chapter 11 bankruptcy protection in July.
Voyager Secures $200 Million Loan
Last month, Voyager signed a deal with SBF-controlled Alameda Research that allowed it to access $200 million of credit in exchange for FTT (FTX Token) and SRM (Serum) collateral.
Voyager’s Chief Executive Officer Stephen Ehrlich said the company would use the fund to safeguard customers’ assets from the current market volatility.