Shares in Voyager Digital plunged more than 60 percent on Wednesday after the crypto broker announced it could lose more than $650 million on loan to struggling hedge fund Three Arrows Capital.
Toronto-listed Voyager said it loaned stablecoin USDC along with 15,250 bitcoin worth $350 million to Three Arrows, a crypto hedge fund that failed to meet margin calls from multiple lenders earlier this month.
The revelations shed more light on the extent of the damage the crisis has done to Three Arrows, a Singapore fund known for its bullish long bets on crypto. Other crypto lenders, including BlockFi and Genesis, also attempted to repay their loans to the fund this month.
Three Arrows has been hit by the broader downturn in crypto markets that has been developing since the May collapse of stablecoin Terra, in which the fund had been heavily invested. Another crypto lender, Celsius Network, halted withdrawals this month.
Voyager offers rewards to retail investors who deposit their crypto, as well as a debit card and app for trading digital assets. In return, she promised customers returns of up to 12 percent. At the end of March, it held $5.5 billion in crypto assets payable to customers.
Those liabilities included stablecoin USDC worth $840 million and 33,000 units of bitcoin. A stablecoin is a type of cryptocurrency that is tied to assets like the US dollar and acts as a bridge between existing financial markets and the crypto world.
Voyager said it has asked Three Arrows to repay the loan by early next week but is “unable at this time to estimate the amount it can recover.”
Shares fell 61 percent in early trade, valuing the company at just CA$150 million (US$116 million). The company’s stock is down 95 percent from its November 2021 peak.
The announcement made no mention of whether Voyager held collateral for its loan to Three Arrows. It declined to comment further.
Earlier this month, Voyager said it “sets itself apart by offering a no-hassle, low-risk approach to lending and asset management by working with a select group of reputable counterparties.” At the time, CEO Steven Ehrlich said Voyager was “well capitalized and well positioned to weather this market cycle and protect customer assets.”
Voyager said it had just $152 million in cash and crypto assets on hand earlier this week, plus $20 million in cash restricted for USDC purchases. The lender said Wednesday it secured a line of credit worth $200 million in cash and $15,000 in bitcoin from Alameda Research, the trading firm of crypto great Sam Bankman-Fried.
The terms of the line of credit allow Voyager to draw down no more than US$75 million in any 30-day period. Bankman-Fried’s FTX crypto exchange also made a $250 million loan to BlockFi this week.
Just last month, Three Arrows Capital and Alameda participated in a private placement of shares in Voyager that raised $58 million. Alameda currently owns 11 percent of the company, Voyager said on Wednesday.
Voyager’s most recent quarterly market update showed that through the end of March, four counterparties accounted for 79 percent of the $2 billion loan book. The top two alone accounted for more than half of the exposure.
Source: Crypto News Austria