Jul 29, 2022 - Economy & Business

Voyager Digital former executive seeking to file competing restructuring plan

Illustration of a glowing blockchain block with cash inside.
Illustration: Gabriella Turrisi/Axios

A former Voyager Digital executive and board member is seeking more information to support his own restructuring plan for the now-distressed crypto lender's bankruptcy proceeding.

Driving the news: Shingo Lavine, who was Voyager Digital's chief innovation officer and a board member until February 2021, shared with Axios why the firm filed an objection with the United States Bankruptcy Court, Southern District of New York.

What they're saying: "We were trying to get into the data room and become an "approved bidder," but to no avail thus far. We don't believe this is very conducive to a fair bidding process — especially since we have a bona fide bid," Lavine says in an email to Axios.

  • Of note: Voyager Digital filed for bankruptcy on July 5, and has an exclusivity period under Chapter 11 law to file a plan.
  • "Debtors initially have 120 days unless someone files a motion to shorten it," Robert Honeywell, restructuring partner at K&L Gates, tells Axios.

Flashback: Voyager Digital in 2019 acquired the Ethos Universal Wallet and its enterprise blockchain called Bedrock from Ethos.io, which Lavine co-founded.

  • The acquisition was completed for 7,250,000 shares of VYGR.

What they're saying: "In early 2021, however, I disagreed with the company's direction and certain decisions being made. Due to these disagreements, I resigned from the board and left the company in February 2021," Lavine said in a statement from Emerald Ocean Ventures late Thursday.

  • Voyager this year shuttered the Universal Wallet, Lavine said: "Rather than individuals safekeeping their crypto, it was instead placed in commingled accounts and loaned to third parties in risky transactions."
  • Voyager Digital declined to comment.

Context: Lavine, via Emerald Ocean, is filing an objection as a creditor. That is one of the many, many firms and customers that Voyager Digital owes.

  • "We, the co-founders of Ethos.io, have been working to come up with a restructuring plan to provide a greater recovery for creditors caught up in the Voyager bankruptcy," Emerald Ocean Ventures said in the overnight statement.
  • "Although we do not know the reasons why the Debtors have not been more accommodating, we are concerned that perhaps management may be seeking to keep control."

Between the lines: Emerald Ocean Ventures would like some say over how Voyager Digital proceeds with the restructuring, so the firm has greater control over how much and in what denomination the crypto lender will pay them back.

  • Emerald Ocean Ventures outlined an 8-step plan in their announcement, proposing, among other things, a "recovery token."

Details: "Provide major additional upside to unsecured creditors and incentivize customer retention through a "recovery token" in addition to VGX Tokens. Give everyone a shot at full, or even above 100%+ recovery," the firm said.

Catch-up fast: Emerald Ocean Ventures' objection in the case follows on the heels of the FDIC and the Federal Reserve Board issuing a cease-and-desist to Voyager Digital from making false or misleading representations of deposit insurance status — statements Voyager has been making since at least 2020.

Of note: Lavine says Voyager Digital's bankruptcy was a result of its "risky, unprofitable and unsustainable" rewards program that promised customers uber-high yields.

  • He adds that the "Cryptopocalypse," or the market downturn that Voyager Digital mentions in its bankruptcy documents, was "simply the match that lit the fire" and not the cause of its facing insolvency.

The bottom line: The new wrinkle in Voyager Digital's bankruptcy proceeding stands to lengthen the time it will take for the crypto lender's customers to get closure.

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