Frequent readers of CoinSnacks know that centralized crypto lenders have been slaughtered during this bear market.
This was seen as a good thing for all parties… The distressed companies would not wholly collapse, customers would not lose all of their money, and SBF would be able to pick up previous Unicorns for pennies on the dollar.
BlockFi gladly took the money. However, Voyager has forcefully rejected the offer.
What’s going on here?
A Quick Recap
We have written extensively over the past month about what went wrong for the centralized crypto lenders. However, if you are new here, here’s a quick TLDR of how Voyager got into this situation:
- 1991: Do Kwon, the founder of the stablecoin Terra, is born
- Early 2000s: Su Zhu and Kyle Davies, founders of crypto hedge fund 3 Arrows Capital (3ac), become high-school friends
- 2020: The Fed turns on the money printer to fight against Covid-19, sparking a crypto bull run
- 2020 – Early 2022: The bull run nets Luna and 3ac billions of dollars
- March 2022: The Fed begins raising rates to combat record inflation
- May 2022: Terra, now worth ~$30 billion, collapses
- June 2022: Under intense pressure from the market downturn and strapped for cash after the Terra collapse, 3ac folds
- July 2022: Slumping asset prices and a lost $665 million loan to 3ac force Voyager to declare chapter-11 bankruptcy
It is at this point that SBF enters the fray.
The Offer to Voyager
SBF made his offer on July 22nd, and it appeared to be centered around protecting customer assets.
Under the plans of the offer, FTX would purchase Voyager’s crypto assets and loans (except the 3ac one). Customers of Voyager would then have the option to start a new account on FTX funded by their portion of the bankruptcy claims. This would allow them to either withdraw immediately and recoup some liquidity or purchase new assets and get back into the game. Either way, it was an improvement over having their funds stuck in Voyager while the bankruptcy played out.
The offer also made a lot of sense for SBF, as he gets some cheap OTC crypto while his exchange FTX potentially acquires a bunch of new users.
Win-win, right? Not according to Voyager.
It took just two days for Voyager to reject the offer.
Voyager’s primary issue with the offer was that it was essentially a liquidation. As we covered last week with Celsius, chapter-11 bankruptcy is a way for companies to restructure their finances, not liquidate them.
Voyager wants somebody to come to their rescue, not buy them out. Not only would SBF’s offer buy them out, but according to Voyager, it would do so for pennies on the dollar.
Voyager’s other issue with the offer is that it goes around the in-place bidding system. Voyager argues that accepting this offer before hearing other bids actually does a disservice to customers, as it is possible that a bigger offer comes in later.
Ultimately, to Voyager, this is nothing more than a “low-ball bid dressed up as a white knight rescue.”
As he often does, SBF took to Twitter to respond to Voyager.
Two key ideas emerge in his Twitter thread: customers are the losers of a bankruptcy process and he believes it is selfish third parties that are opposed to his offer.
As SBF notes, bankruptcy proceedings take a long time and are very expensive. Not only do customers not have access to their funds during the process, but their funds are slowly drained from payments to bankruptcy consultants. By the time it’s over, it’s anybody’s guess as to how much the customer will get back.
Third parties like consultants, however, love a lengthy bankruptcy process. The longer the process, the more fees they rack up. SBF believes these people pressured Voyager to reject the offer. A quick resolution like SBF’s offer is not in their best interests.
SBF believed his plan would have best served the customer. Voyager disagreed. So now we are at the same spot as before: looking at a lengthy bankruptcy process in which the customer is likely to lose out.
It’s a shame that it got to this point. As we talked about last week, customers should not be the ones who lose out from upper-level mismanagement. Hopefully, Voyager will take every step necessary from here on out to protect its customers. It’s the least they can do.