Voyager victim calls for trustee to seize control of the estate

A Voyager creditor and finance lawyer wants to see a chapter 11 trustee appointed in crypto brokerage Voyager Digital’s bankruptcy trial, which would see Voyager lose control of its estate.

In a Feb. 1 motion, Voyager creditor Michelle DiVita accused Voyager of having a “history of financial statement inaccuracies and public misrepresentations that were known, or reasonably discoverable, at the beginning of the bankruptcy proceeding.”

Due to this pre-bankruptcy conduct, DiVita believes that an examiner or trustee should have been requested, and is now doing so herself.

The filing alleges that Voyager “concealed the true nature of its lending activities by publishing financial reports that materially understated its loan positions by more than $1 billion USD.”

@investvoyager loans disclosed on March 31 financial report: $2.2B.

Actual loans on April 3: $3.1B

$1.1B concealed in one business day.

Releases are unconscionable @VoyagerUCC @DOJCrimDiv #VGX pic.twitter.com/dP8g9yvY48

— Michelle DiVita (@ChelleDiVita) January 13, 2023

A former director and CIO for Voyager, Shigo Lavine, highlighted some of the key accusations made in the filing in a lengthy Feb. 1 twitter thread.

For example, Voyager allegedly underreported a loan to crypto hedge fund Three Arrows Capital by $609 million and also undervalued Bitcoin (BTC) in its financial reports by 546% to downplay the size of its loans.

The Debtor provided assurances in regards to its ability to raise capital and meet liquidity requirements.

This led many (including myself) to incorrectly conclude that Voyager would be able to survive this despite 3AC going under pic.twitter.com/jjnloWDG7A

— Shingo Lavine (@shingolavine) February 1, 2023

According to the filing, crypto exchange Coinbase also caught wind of Voyager’s “financial reporting inconsistencies,” and had reportedly backed out of a potential deal to acquire the assets of Voyager after finding “the financials don’t add up.”

The bankruptcy proceedings already involve a United States Trustee, who is required to bring a motion to appoint a chapter 11 trustee when there are “reasonable grounds to suspect” that the debtor “participated in actual fraud, dishonesty or criminal conduct.”

While the U.S. Trustee appoints a creditors committee and reviews applications for the recompensation of professionals amongst other duties, they may also hire a bankruptcy trustee to manage the debtor’s affairs if the debtors are not allowed to do so themselves.

Cointelegraph has contacted Voyager for a response to the allegations and the motion but did not receive an immediate response.

Related: Voyager tells court Binance acquisition plan is ‘sound business judgment,’ urgently needed

In other news, both Voyager and its creditors have pushed back at an attempt by bankrupt trading firm Alameda Research to claw back $446 million in loan repayments.

After commencing chapter 11 proceedings on Jul. 5, Voyager had demanded the repayment of all its outstanding loans to Alameda, and was repaid in full.

However, Alameda sought to recover the funds in a Jan. 30 court filing, arguing that because they repaid the loans within 90 days of filing for chapter 11 bankruptcy themselves, they could “claw back” these funds for the benefit of Alameda creditors.

Voyager says that its creditors have suffered “substantial harm” due to Alameda making a bid for Voyager’s assets that it could not honor, costing them in excess of $100 million. Voyager argues that this makes Alameda’s claim subordinate to those of its other creditors.