The encyclopedia · Trading & Investing · Financial decision · 2022
Voyager Digital lent customer crypto to Three Arrows Capital — and both went bankrupt
Voyager Digital, a crypto broker, lent $670M to Three Arrows Capital. When 3AC collapsed in 2022, Voyager froze withdrawals and filed for bankruptcy.
Voyager Digital · 2022-07
What happened
Voyager Digital, a publicly traded crypto brokerage, lent approximately $670 million in crypto assets to Three Arrows Capital (3AC), a crypto hedge fund. The loan was largely unsecured, backed primarily by 3AC's reputation and a small amount of collateral.
When 3AC collapsed in June 2022 (triggered by the Terra/LUNA crash), Voyager could not recover the $670 million loan. The loss rendered Voyager insolvent. On July 1, 2022, Voyager froze all customer withdrawals. The company filed for Chapter 11 bankruptcy on July 5.
The case illustrated the danger of concentrated counterparty risk in crypto lending: Voyager's largest borrower was also its largest risk, and the loan was undercollateralized. When the borrower failed, the lender failed with it. The case was part of the broader crypto contagion of 2022 that also took down Celsius, 3AC and eventually FTX.
Why it happened
- Voyager lent $670M to 3AC, largely unsecured.
- When 3AC collapsed, Voyager could not recover the loan.
- Voyager froze withdrawals and filed for bankruptcy.
- The case was part of the 2022 crypto contagion.
The lesson
Concentrated counterparty risk is a single point of failure. Voyager lent $670M to 3AC, largely unsecured. When 3AC failed, Voyager failed with it.
Aftermath
Voyager filed for bankruptcy. Customer assets were eventually partially recovered through the bankruptcy process. The case prompted a re-examination of counterparty risk management in crypto lending.
Sources
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