A Voyager creditor and a finance lawyer want a chapter 11 trustee named in the bankruptcy trial of cryptocurrency brokerage firm Voyager Digital, in which Voyager would lose control of its estate.
In a February 1 motion, Voyager creditor Michelle DiVita accused Voyager of having a “history of financial statement inaccuracies and public misrepresentations that were known, or reasonably detectable, at the commencement of the bankruptcy proceedings.”
Because of this pre-bankruptcy conduct, DiVita believes an examiner or trustee should have been requested, and is now doing so herself.
The filing alleges that Voyager “concealed the true nature of its lending activities by publishing financial reports that materially understated its lending positions by more than $1 billion.”
@investtraveller Loans disclosed in March 31 financial report: $2.2B.
Actual loans on April 3: $3.1B
$1.1 billion hidden in one business day.
The throws are excessive @ViajesUCC @DOJCrimDiv #VGX pic.twitter.com/dP8g9yvY48
—Michelle DiVita (@ChelleDiVita) January 13, 2023
A former Voyager director and CIO, Shigo Lavine, highlighted some of the key allegations made in the filing in a lengthy Twitter thread on February 1.
For example, Voyager allegedly understated a loan to crypto hedge fund Three Arrows Capital by $609 million and also understated Bitcoin (BTC) in its financial reports by 546% to minimize the size of its loans.
The Debtor provided guarantees regarding its ability to raise capital and meet liquidity requirements.
This led many (including me) to incorrectly conclude that Voyager could survive this despite 3AC being sunk. pic.twitter.com/jjnloWDG7A
— Shingo Lavine (@shingolavine) February 1, 2023
According to the filing, cryptocurrency exchange Coinbase also learned of Voyager’s “financial reporting inconsistencies” and had reportedly backed out of a potential deal to acquire Voyager’s assets after discovering that “financials were not square”.
Bankruptcy proceedings already involve a United States Trustee, who must file a motion to appoint a chapter 11 trustee when there are “reasonable grounds to suspect” that the debtor “engaged in actual fraud, dishonesty, or criminal conduct.”
While the US Trustee appoints a creditors’ committee and reviews professional award applications, among other duties, the US Trustee may also hire a bankruptcy trustee to manage the debtor’s affairs if the debtors are unable to do so themselves.
Cointelegraph contacted Voyager for a response to the allegations and the motion, but did not receive an immediate response.
Related: Voyager Tells Court Binance Takeover Plan Is ‘Good Business Judgment’, Urgently Needed
In other news, both Voyager and its creditors have pushed in an attempt by bankrupt trading firm Alameda Research to recover $446 million in loan repayments.
After beginning chapter 11 proceedings on July 5, Voyager had demanded payment on all of its outstanding loans to Alameda, and was repaid in full.
However, Alameda sought to recover the funds in a Jan. 30 court filing, arguing that because they repaid the loans themselves within 90 days of filing for Chapter 11 bankruptcy, they could “recover” these funds for the benefit of Alameda’s creditors.
Voyager says its creditors have suffered “substantial damage” because Alameda made an offer for Voyager’s assets that it failed to honor, costing them more than $100 million. Voyager argues that this makes Alameda’s claim subservient to that of its other creditors.
