Below is our initial take on recent bankruptcy-related developments:
In Voyager’s first bankruptcy hearing, the company’s lawyers said that they had proposed a restructuring plan as early as possible to assure customers that their assets were safe, although Voyager considers customer assets to be the company’s property. Voyager also told U.S. Bankruptcy Judge Michael Wiles that customers do not own the crypto assets in their accounts, but rather hold unsecured claims for the value of the assets.
S&K Take: This has been the big news of the week, which we have covered in real time as things have unfolded. Obviously, a case that we have been on the lookout for, with myriad issues of interest. The big reveal to date has been the determination that crypto lent to the company by customers is not being considered property of the customers, but property of the bankrupt estate. Questionnaires for prospective committee members are due today at noon ET. Committee composition should be largely customers, who will undoubtedly have a lot to say about the case.
New York Judge Freezes Assets of Three Arrows Capital as Crypto Firm’s Founders Remain Underground | CNBC
Documents filed last week allege that the founders of bankrupt crypto hedge fund Three Arrows Capital have not cooperated with the fund’s liquidators and now appear to be avoiding creditors, leading to a federal judge in a New York bankruptcy court freezing 3AC’s remaining assets.
S&K Take: The founders of 3AC are nowhere to be found. Judge Glenn has therefore granted the fund’s liquidators subpoena power to obtain information about the fund’s assets and activities. A concern is that the founders are liquidating property of the company for their own benefit. This case has a direct impact on Voyager, as Voyager is a significant creditor of 3AC.
Pharmaceutical company Endo International PLC is rolling towards bankruptcy protection prior to reaching agreements with junior bondholders and opioid plaintiffs but will likely reach a deal with secured creditors before entering the Chapter 11 process.
S&K Take: The next opioid bankruptcy seems imminent, although it sounds like there is some wood to chop before filing. This case could be on par with the Mallinckrodt cases, which was a sprawling bankruptcy that took place over the course of the last few years.
New Jersey-based crypto lender Celsius filed for bankruptcy late Wednesday night, becoming the third crypto firm in two weeks to declare bankruptcy. Celsius froze customer accounts last month, and now estimates its assets and liabilities between $1 billion and $10 billion, with more than 100,000 customers who are now considered unsecured creditors.
S&K Take: Celsius has followed Voyager into bankruptcy. We issued a brief blog update about this one last night, noting a pretty significant shortfall in customer crypto. This case has some differences, as it seems Celsius has a more diverse business than Voyager, with BTC mining operation. Not much has been revealed on this one yet, but we will, unsurprisingly, be watching closely.