After billion-dollar crypto brokerage firm Voyager Digital suspended withdrawals and filed for Chapter 11 Bankruptcy Protection as a result of the recent cryptocurrency market crash, a YouTube investigator has deep-dived into the company’s demise, explaining why its practices may not be entirely legal.
As it happens, the firm’s integrity has been called into question by Stephen Findeisen, a.k.a. Coffeezilla, a YouTuber who investigates online scams. Specifically, in his video published on July 13, Findeisen listed all the things he uncovered about which Voyager reportedly lied to its clients.
Misleading the clients?
According to the YouTuber, Voyager, which guaranteed up to 9-10% yield on investment, also claimed it had a low-risk approach to investing and could withstand any bear market which, as Findeisen explained, was “a gigantic red flag that you should never ignore.”
On top of that, Voyager gave $654 million of their clients’ loans to a single hedge fund – Three Arrows Capital (3AC) – which, in turn, invested this money in Terra (LUNA). The collapse of LUNA made this loan worthless. In other words, this meant that the company’s alleged low-risk approach seemed like nothing but false marketing.
Furthermore, Voyager also made big claims about the FDIC (Federal Deposit Insurance Corporation) insurance under the partnership with a legitimate bank – the Metropolitan Commercial Bank. However, the YouTuber said it had failed to inform its clients that this insurance only covered their assets in the event of the bank’s failure, not Voyager’s.
Potential legal issues
Finally, Findeisen also brought into question the grounds of Voyager’s declaration of Chapter 11 Bankruptcy, which allows a company to restructure its business to repay debts while its operations are paused. Voyager’s solution for restructuring its way out of insolvency was to print more Voyager money and shares.
The YouTuber explained that this declaration might not be legal as the company described its business as neither a stockbroker, commodity broker, clearing bank, or any of the other options, despite widely advertised claims to be a brokerage firm.
In his words, the reason behind this was that businesses described as the above aren’t allowed to do a Chapter 11 Bankruptcy, but are instead liquidated under the Securities Investor Protection Act (SIPA). Under SIPA, investors get special protection and are the first to get paid. However, this would mean that Voyager’s plan to print more money and stocks was not going to work and Voyager would probably have to shut down its operations.
As it turns out, according to Findeisen, Voyager’s customers were just unsecured creditors, with the company changing its narrative and stating that all of its customers’ crypto was actually Voyager’s crypto. That said, the judge at the Voyager’s first bankruptcy hearing pointed this fact out and questioned whether it had even filed for the right type of bankruptcy case.
Meanwhile, Alameda Research, the trading firm co-founded by crypto billionaire Sam Bankman-Fried and one of Voyager’s largest debtors, stated it was “happy to return the Voyager loan and get out collateral back whenever works for Voyager,” as Finbold reported in early July.
Watch the full video below: YouTuber investigators accuses Voyager of false marketing