A Voyager creditors and finance lawyers want to see about 11 trustees appointed in crypto brokerage Voyager Digital try bankruptcy, which will see Voyager lose control of its estate.
In a Feb. 1 motion, Voyager creditor Michelle DiVita accused Voyager of having “a history of inaccurate financial reporting and public misrepresentations that were known, or reasonably discovered, early in the bankruptcy process.”
Because of these pre-bankruptcy actions, DiVita believed that an examiner or trustee should be called in, and now they are doing so.
The filing alleges that Voyager “concealed the true nature of its loan activities by publishing financial statements that reduced its loan position by more than $1 billion USD.”
@investvoyager loans disclosed in March 31 financial statements: $2.2B.
Actual loans as of April 3: $3.1B
$1.1B hidden in one business day.
Release is not possible @TravelingUCC @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 submission in a lengthy 1 February twitter thread.
For example, Voyager allegedly underreported the loan to the crypto hedge fund Three Arrows Capital by $609 million and also undervalued Bitcoin (BTC) in the financial report by 546% to downplay the size of the loan.
Debtors provide guarantees regarding their ability to raise capital and meet liquidity requirements.
This led many (myself included) to wrongly conclude that Voyager would survive even though 3AC would exist. pic.twitter.com/jjnloWDG7A
— Shingo Lavine (@shingolavine) February 1, 2023
According to the filing, crypto exchange Coinbase was also caught off guard by Voyager’s “financial reporting inconsistencies,” and reportedly backed out of a potential deal to acquire Voyager’s assets after discovering that “financials were not improving.”
The bankruptcy process has involved the United States Trustee, who must bring a motion to appoint a chapter 11 trustee when there is “reasonable reason to suspect” that the debtor “engaged in fraud, dishonesty or actual criminal conduct.”
While the US Trustee appoints a committee of creditors and reviews applications for professional compensation among other duties, he can also hire a bankruptcy trustee to manage the debtor’s affairs if the debtor is not allowed to do so on his own.
Cointelegraph has contacted Voyager in response to the allegations and the move but did not immediately receive a response.
related: Voyager tells court Binance acquisition plan is ‘good business judgment,’ urgently needed
In other news, Voyager and its creditors have dropped an attempt by bankrupt trading firm Alameda Research to recover $446 million in debt payments.
After starting Chapter 11 on July 5, Voyager has demanded repayment of all delinquent loans to Alameda, and has paid them off in full.
However, Alameda sought to recover the funds on January 30 filed in court, arguing that because they repaid the loan within 90 days of filing Chapter 11 bankruptcy alone, they could “claw back” these funds for the benefit of Alameda’s creditors.
Voyager said creditors have suffered “substantial damage” because Alameda made an offer for Voyager’s assets that could not be honored, at a cost of more than $100 million. Voyager argued that this made Alameda’s claim less expensive than other creditors.