Barely two weeks after the operating subsidiary of Voyager issued a notice of default to cryptocurrency hedge fund Three Arrows Capital (3AC), the firm itself has now turned in the towel to bankruptcy.
Voyager files for bankruptcy
On July 5th, the cryptocurrency asset broker filed for Chapter 11 bankruptcy relief with the Southern District Court of New York. In a press statement, the company noted that it has more than $110 million in cash and cryptocurrency to aid day-to-day operations during the Chapter 11 process.
Voyager said it also holds about $350 million of cash in Metropolitan Commercial Bank (MCB) on behalf of the consumers. The New York-chartered bank confirmed this in a recent report but clarified that its FDIC insurance doesn’t extend to the beleaguered cryptocurrency brokerage firm.
MCB maintains an omnibus account for Voyager customers’ US dollar deposits, not cryptocurrency. Although the bank is a member of the Federal Deposit Insurance Corporation (FDIC) or has FDIC insurance, the coverage doesn’t extend to Voyager as an entity or protect it against bankruptcy.
“FDIC insurance coverage is available only to protect against the failure of Metropolitan Commercial Bank. FDIC insurance does not protect against the failure of Voyager, any act or omission of Voyager or its employees, or the loss in value of cryptocurrency or other assets,” Metropolitan Commercial Bank.
Voyager doesn’t have FDIC insurance
This simply entails that Voyager doesn’t have direct insurance coverage from the FDIC. Crypto companies do not qualify for the FDIC insurance program because the federal agency doesn’t recognize cryptocurrency as a legal tender and because they are not backed by the government.
However, these crypto companies can hold cash in custodial accounts at FDIC-insured banks, which will be protected by the agency should the bank fail.
The $350 million cash held with MCB could be deployed by Voyager to facilitate the reimbursement process. It said, “customers with USD deposits in their account(s) will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.”
