December 4, 2022

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Clients of troubled cryptocurrency lender Voyager Digital may find some solace in the news that FTX, the bitcoin exchange founded by billionaire Sam Bankman-Fried, is set to seize assets of the company after winning a bankruptcy auction.

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After several rounds of bidding, the US subsidiary of FTX was selected as the highest bidder for Voyager’s assets, the companies said in a statement late Monday. The bid 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 $111 million “additional consideration” in estimated incremental value.

Voyager filed for Chapter 11 bankruptcy protection in July after a steep drop in digital currency prices, leaving it unable to cash withdrawals from its customers. The firm’s demise was partly due to the collapse of Three Arrows Capital, a so-called hedge fund that took loans from other institutions, such as Voyager, to make a risky gamble on tokens — including the stablecoin TeraUSD. In June, 3AC defaulted on a $670 million loan from Voyager.

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Voyager indicated the possible transition of its customers to FTX US, saying that the exchange will “enable customers to trade and store cryptocurrency after the conclusion of the company’s Chapter 11 cases.” The property purchase deal will be submitted to the US Bankruptcy Court for the Southern District of New York for approval on October 19. The sale of Voyager assets to FTX US is subject to a vote of creditors, as well as “other customary closing conditions,” according to the statement.

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The move is a possible step toward compensating Voyager users, who have few legal avenues to pay for crypto stored on the platform, before stopping customer withdrawals. In bankruptcy proceedings, customers of crypto platforms are treated as unsecured creditors, meaning they are not actually entitled to the crypto they have purchased, and like other creditors they have to ask the courts to get their money back. Gotta pass. Creditors to Mount Gox, which closed in 2014, are still waiting to be repaid.

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

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In the crypto winter of 2022, Bankman-Fried has emerged as a savior for many firms that have fallen prey to the falling value of digital tokens and liquidity issues on their platforms. A 30-year-old quant trader-cryptocurrency extraordinaire has been shopping for a bargain amid the industry’s recent carnage.

In July, FTX signed a deal that gives it the option to buy lender BlockFi after providing it with a $250 million line of credit. Banksman-Fried says he still has plenty of cash to spend on further deals. And that could soon get even more, with sources telling CNBC that FTX is raising another $1 billion from investors in an upcoming financing round.

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, CNBC’s Kate Rooney