Sam Bankman-Fried’s Alameda, Voyager Digital spar in bankruptcy court

Sam Bankman-Fried has become a crypto billionaire and one of the most famous players in the industry by building a crypto exchange FTX become a leading website used by traders and investors.

His company is worth 32 billion dollars in January and now has over a million users averaging nearly 10 billion dollars in daily trading volume. But it’s still privately held, so the public doesn’t know how it was damaged by “crypto winter” in the past few months. As a point of referenceCoinbasewhich is public, has lost about two thirds of its value this year, and the mining company Digital Marathon reduced by more than half.

While Bankman-Fried, who lives in the Bahamas, has a financial benefit from obscurity, his exposure to the broader industry became apparent last week during his Chapter 11 bankruptcy hearing. lasted 5 hours in the Southern District of New York because of suspected crypto brokerage Voyager Digital.

Voyager is among a growing number of crypto firms seeking bankruptcy protection amid a flood of customer withdrawals after plunge bitcoin, ethereum and other digital currencies. Bankman-Fried’s role complicates matters further, because he also controls the quantitative trading firm Alameda Research, borrow hundreds of millions of dollars from Voyager and became a major equity investor before turning around and providing bailout for the company.

Meanwhile, Bankman-Fried is trying to play the role of industry reinforcer, gathering hard-hit assets both as a bet on their eventual recovery and to bolster its foothold in the US. . In July, FTX acquired the crypto lending company. BlockFiand two months before that Bankman-Fried disclose 7.6% shares in the trading app is defeated Robin Hood hero. Bloomberg even reported that FTX tried to buy Robinhood, although Bankman-Fried has denied any active discussions are underway.

Outside of the US, FTX bought a Japanese crypto exchange Liquid and discussed to get the owner of the Korean cryptocurrency exchange Bithumb.

Given his activity on the hyperdrive, it is clear that Bankman-Fried is not immune to the infection that has plagued the crypto industry.

Last week, attorneys for Alameda Research and Cruise ship argued in court over what was revealed to be a deep and complicated relationship between the two companies. Documents reviewed by CNBC show the relationship stretches back to September 2021. In Voyager bankruptcy documentsThe company disclosed that Alameda owed the company more than $370 million but did not say how long Alameda had been a borrower of Voyager.

Voyager filed for bankruptcy in early July after suffering massive losses from its exposure to crypto hedge funds. Three capital arrowsalso known as 3AC, has been operating after defaulting on loans from several industry players — including more than $650 million from Voyager.

Court documents and Voyager’s financial statements show that Alameda switched from a borrower to a lender within a few weeks of the 3AC incident that plunged Voyager into despair. Bankman-Fried .’s company provide a $500 million bailout to Voyager at the end of June.

Joshua Sussberga partner at Kirkland & Ellis representing Voyager, told the court that Bankman-Fried “weared many hats” during Voyager’s trip quick journey from prosperity to bankruptcy. In fact, a few weeks after Voyager filed for bankruptcy, FTX and Alameda move in together as a potential contractor for Voyager customer accounts, with Bankman-Fried said priority is to give them liquidity.

Bankman-Fried has arrived Twitter to make its case, turning a typical boring process into something of a circus. Voyager’s legal team is not happy and thinks the billionaire is trying to leverage himself in a potential transaction.

“Parties in our process have clearly expressed concern to us that FTX has one leg and is working behind the scenes to begin its operations,” he said. “I want to assure all parties, the courts and our customers, that we will not stand for that.”

Andrew Dietderich, attorney for Alameda and a partner at Sullivan & Cromwell, said the rescue agreement provides a faster timeline than Voyager’s, but it was “violently rejected.”

Michael Wiles, the United States bankruptcy judge for the Southern District of New York, did not like the arguments made.

When speaking to attorneys, Wiles said he had no intention of turning the hearings into “a kind of cable show with people making accusations against each other and making outrageous descriptions.” characteristic of their previous proposals or discussions.”

Lawyers from Alameda acknowledged that the business relationship between Voyager and its client was deeper than a simple lending relationship and that the company borrowed about $377 million from Voyager.

Voyager’s financial documents, made public because the company’s shares are traded in Canada, appear to suggest that Alameda initially borrowed more than that. December of the company 2021 books refers to a $1.6 billion crypto-asset loan, with rates ranging from 1% to 11%, to an institution based in the British Virgin Islands.

Alameda is registered in the British Virgin Islands, Headquartered in Tortola, and is the only partner located there. It is one of the at least seven entities usury from Voyager. The same Voyager document revealing 3AC’s default also lists a “Partner A”, a company registered in the British Virgin Islands, that owes Voyager $376.784 million. In the company’s bankruptcy presentation, the company listed Alameda as $377 million in debt to Voyager. In submit another applicationthat loan is tied to a company with a loan interest rate ranging from 1% to 11.5%.

A representative for Voyager declined to comment. Alameda did not respond to a request for comment.

Loan balances for the British Virgin Islands-based fund fell to $728 million in March 2022, representing 36% of Voyager’s lent crypto assets, before falling to around $377 million. la three months later. Disclosure data is provided by FactSet and sourced from Canadian securities administrators.

Voyager’s relationship with Alameda will quickly shift from lender to borrower, like 3AC default with the $654 million owed by Voyager to make this company a success.

Alameda stepped in with a bailout on June 22, but with restrictions. $500 million rescue – $200 million in cash and USDC and approximately $300 million in bitcoin, based on prevailing market prices – has a limited withdrawal rate, capped funding at 75 million dollars for a period of 30 days.

Alameda’s lawyers said in court on Thursday that the loan was made “on an unsecured basis” at the specific request of Voyager management.

At the time, Bankman-Fried was already a major stakeholder in Voyager through two equity investments from Alameda.

At the end of 2021, Alameda played a $75 million buy sharesacquired 7.72 million shares at $9.71 a piece, according to Voyager filings for the period ending December 31. In May of this year, Alameda spend an extra $35 million on about 15 million shares, with the share price falling to $2.34.

The combined purchases gave Alameda an 11.56% stake in Voyager and made it the largest shareholder. By the next month, when Alameda completed its bailout, its $110 million equity investment was worth only about $17 million.

As a holder of at least 10% of Voyager’s equity, Alameda is required to file disclosures with Canadian securities regulators. But on June 22, the day of the rescue, Alameda surrender block 4.5 million shares, bringing the ownership rate down to 9.49% and disable reporting requirementsaccording to Canadian regulations and Voyager’s own profile. Same profile shows the surrendered shares “later canceled by Voyager.”

Disclosure of the sale indicates that, to bring its ownership below the 10% threshold, Alameda gave away 2.29% of the shares worth about $2.6 million.

Neither Bankman-Fried equity nor bailout funding could stop the situation as customer acquisitions devoured Voyager’s cash. Nine days after announcing the $500 million package, Voyager freeze customer withdrawals and transaction. On July 6, Voyager bankruptcy declaration Chapter 11.

To reassure the platform’s millions of users, Voyager CEO Stephen Ehrlich tweeted that after the company goes through bankruptcy proceedings, members with crypto in their accounts will be able to afford it. conditions for getting a bag of stuff, including pooling some of the assets they hold, popularizing shares in Voyager tokens, reorganized Voyager, and any funds they may receive from a loan is now defunct for 3AC.

None of that is guaranteed. Voyager customers won a small victory in bankruptcy court on Thursday, after the court granted them access to $270 million in cash The tour was organized with the Metropolitan Commercial Bank. Users, however, are still out of luck when it comes to everything else.

Bankman-Fried says he’s here to help customers get back up and running and get what they can. On the other hand, Voyager’s attorneys describe the FTX-Alameda bid as a fire sale.

Whatever happens, this could be Bankman-Fried’s last best shot at getting some value out of his massive financial commitment. In a press release in July, he attempted to turn his offer around as a boon for Voyager clients who were suddenly caught up in a “bankrupt crypto business.” .

Bankman-Fried said in the statement that the deal will allow Voyager customers to “get early liquidity and get some of their assets back without forcing them to speculate on bankruptcy outcomes and take risks.” one side.”

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