voyager get my crypto back

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How Bankrupt Voyager Plans To Return Crypto To Customers

Zinger key points.

• Voyager CEO Stephen Ehrlich shares a Plan of Reorganization that would see account access returned to customers.
• Customers would receive a combination of crypto, shares in a newly organized company and Voyager's crypto token VGX.

Editor's note: This story has been updated to better reflect Voyager's proposed plan of reorganization, which requires court approval. 

Voyager Digital CEO Stephen Ehrlich said Wednesday that customers with U.S. dollar deposits on its brokerage platform will receive access to funds after the completion of a fraud prevention process.

What Happened: Earlier today, Benzinga reported that Voyager Digital Ltd. VYGVF filed for Chapter 11 bankruptcy.

Voyager has approximately $1.3 billion of cryptocurrency assets on its platform, besides claims against  Three Arrows Capital (3AC) of more than $650 million.

Voyager CEO Stephen Ehrlich addressed the situation on Twitter Inc TWTR , sharing details of a plan of reorganization that he said would return account access to customers.

Under the proposed plan, customers would receive a combination of crypto, proceeds from the 3AC recovery process, equity shares in the newly organized company and the platform’s native Ethereum ETH/USD -based crypto token Voyager Token VGX/USD .

At press time, VGX was trading at $0.214, recording a 13% decline over 24 hours.

“It’s important to note that as part of this announcement we are confirming that customers with USD deposits in their account(s) will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank,” stated Ehrlich in his Twitter update.

A majority of customers took to Twitter to share their displeasure at Voyager’s proposed means for reimbursing their accounts.  

Disclosure: Benzinga CEO Jason Raznick Is a member of the unsecured creditor committee in the Voyager Digital bankruptcy case. 

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Voyager Customers May Not Get All Their Crypto Back, Company Admits

The amount that affected customers receive back hinges upon Voyager Digital's success in recouping more than $650 million from Three Arrows Capital, which defaulted on loans.

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Voyager Digital has admitted that its customers may not receive all of their cryptocurrency deposits back.

In a new update, the company warned "exact numbers will depend on what happens in the restructuring process."

Last week, Voyager filed for Chapter 11 bankruptcy protection "to create an efficient path to resume account access and return value to customers."

While it has $1.3 billion in cryptoassets on the books, the firm claims it's owed more than $650 million by Three Arrows Capital, which defaulted on loans.

Voyager's now warned that its ability to make customers whole will hinge upon its success in recovering assets from 3AC.

Executives also say they're working on restoring access to USD deposits, and the announcement suggests those who had cash tied up in Voyager will end up receiving their money back in full.

The firm did offer a clarification on the issue of whether these funds are protected by the Federal Deposit Insurance Corporation. Customers would only benefit from FDIC if the bank where their funds are held went under — meaning there's no insurance if Voyager fails.

All of this has instilled little comfort in Voyager's customers — especially a plan to compensate them with the platform's tokens, as well as shares in a newly reorganized company. One wrote:

"What I want is my crypto! I don't want something you believe is best for the customers! We trusted you and you failed us. Why do we have to suffer any longer? Doesn’t do much to instill trust in crypto."

Another warned that Voyager is providing little incentive when it comes to customer retention, adding:

"Loyalty has been destroyed. Once you turn back on, almost everyone will pull all their assets like a 'bank run' and you will not be a viable exchange any more. Trust gone!"

Others cautioned that Voyager's plan could be susceptible to change because it'll need to be approved by a court, as well as creditors and account holders:

"Chapter 11 bankruptcy is often unsuccessful … The plan you see today could change a lot in the coming months (better or worse.)"

Trading, deposits, withdrawals and loyalty rewards remain suspended on Voyager — following in the footsteps of Celsius Network, which pulled the plug four weeks ago.

Connor Sephton

I cover the crazy world of crypto.

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Voyager Digital Recovers 30%: Second Distribution Coming For Crypto Creditors

A nnouncing its progress in recovering funds from various sources, bankrupt firm Voyager Digital on Wednesday announced it has secured a combined $484.35 million from FTX , Three Arrows Capital (3AC), and Directors and Officers (D&O) insurance settlements.

In a detailed status update regarding the recovery and distribution of assets to creditors following the firm’s financial collapse to the United States Bankruptcy Court for the Southern District of New York, the company stated that the bulk of the recovered funds—approximately $450 million—will come from the settlement with FTX.

This amount represents about 25% of Voyager creditors’ original claims and is expected to be disbursed in a forthcoming distribution round.

This settlement with FTX, which includes interest, is a significant step toward reimbursing creditors affected by Voyager's downfall.

In addition to the FTX settlement, Voyager has secured a claim of roughly $675 million in the ongoing Three Arrows Capital proceedings.

Of this, $20.43 million constitutes Voyager’s pro rata share of the initial distribution from Three Arrows Capital.

The plan administrator anticipates that further payments will be made over the next few years as assets continue to be liquidated and as litigation recoveries are achieved.

Furthermore, a settlement reached in the D&O insurance mediation will provide no less than $14.35 million for the benefit of Voyager creditors.

This settlement is part of the broader efforts to compensate those affected by the company’s financial mismanagement.

Also Read: Crypto Analyst Benjamin Cowen Warns of Summer Correction Amid Bitcoin Dip

Challenges With Uncashed Checks And Security Concerns

The report also highlighted logistical issues, such as approximately 270,000 uncashed checks totaling $17 million.

A significant portion of these checks, around 187,000, are for amounts less than $25.

The plan administrator has set a deadline of April 20, 2024, after which all outstanding checks will be canceled and deemed unclaimed.

Additionally, Voyager continues to grapple with the aftermath of a data breach.

The investigation, assisted by specialized external professionals, is still underway to determine the source and full impact of the breach, which compromised creditor information.

Implications For The Digital Asset Industry And Upcoming Conference

These developments in Voyager Digital’s bankruptcy case are set to be a topic of discussion at Benzinga’s upcoming Future of Digital Assets conference on Nov. 19.

The conference will delve into the implications of such high-profile bankruptcies within the cryptocurrency sector, exploring both the financial and regulatory repercussions.

Read Next: Bitcoin ETF Outflows Slow To $19.5M, Hong Kong Targeting April For Bitcoin ETF Launch

Disclosure: Benzinga founder Jason Raznick was formerly a member of a Voyager Digital creditor committee that was dissolved in 2023. He opted against serving in subsequent committees.

Photo: Shutterstock .

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Bankrupt crypto lender Voyager Digital predicts 35% customer payout

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For Creditors Entitled to an Initial Recovery

This website is intended to keep voyager creditors informed regarding the status of the voyager bankruptcy cases.  if you are a creditor, please use the login button in the upper right hand corner to access additional information. if you are having trouble accessing your information, please visit the help center to view our faqs or submit a ticket ., recent updates, plan administrator's fifth status report, plan administrator's fourth status report, plan administrator's third status report, privacy policy, privacy disclosure, help center.

How to File a Claim Against Voyager and Get Your Money Back [2023 Guide]

Have you heard that  cryptocurrency exchange Voyager has filed for  Chapter 11 bankruptcy ? Did you invest in using the platform after watching commercials featuring Mark Cuban? Did you go to take your money out and realize that you may have been scammed?

What the case, Voyager's exchange and markets are without enough liquidity to cover their debts, and they filed for bankruptcy in July 2022. So now, it's time to consider your options if you had money invested with their platform. In this blog post, I'll outline how you can try to get your money back from them.

What to Know about Voyager and Bankruptcy:

The first thing to know is that Voyager has filed  "Chapter 11"  Bankruptcy as of November 17th, 2022. That means they are officially seen as the "debtor" by the Bankruptcy Court, aka the party that owes debts. If Voyager owes you money, that makes you a possible "creditor."

Named after the U.S. bankruptcy code 11, corporations generally file Chapter 11 if they are insolvent and require time to restructure their debts. This version of bankruptcy gives the debtor a fresh start. However, the terms are subject to the debtor's fulfilling obligations under the reorganization plan. During a Chapter 11 proceeding, the court will help a business restructure its debts and obligations. In most cases, the firm remains open and operating. Many large U.S. companies file for Chapter 11 bankruptcy and stay afloat. Such businesses include automobile giant General Motors, the airline United Airlines, retail outlet K-mart, and thousands of other corporations of all sizes.

The biggest advantage for Voyager is that the business can continue operations through the reorganization process. This allows them to generate cash flow that can aid in the repayment process.

But how do you get involved with the repayment process? Well, the first step is to file a  "Proof of Claim."

What is a Proof of Claim?

Proof of claim is an essential element in the bankruptcy process. It documents your right as a creditor to repayment from the debtor. The proof of claim describes the type of claim, priority status, and the amount of the outstanding debt.

The debtor's chapter 11 bankruptcy filing may significantly impact a creditor and can jeopardize its ability to handle its financial responsibilities. Filing a chapter 11 bankruptcy proof of claim can affect whether, how, and when you receive repayment from a debtor.

Chapter 11 creditors technically do not need to file a  proof of claim  if the debtor has accurately described the nature and amount of the debt owned in its schedules and has not designated the debt as disputed.

But even though you are not technically required to file  a proof of claim , it can be helpful. For example, the proof of claim will supersede the information regarding the claim that the debtor listed in their schedule of  assets and liabilities . Additionally, if you do not file a proof of claim form, the bankruptcy court will accept the information the debtor listed. Filing your form allows you to dispute any inaccuracies in the debtor's schedules such as:

• The category of debt
• The amount listed
• The creditor is not listed
• The claim is designated as disputed, unliquidated, or contingent

Also, if you do not receive notice from the court, it could mean that Voyager has overlooked its financial obligation to you. But don't worry. You still have a legal path to recompense through a " Proof of Claim ."

What Information Do I Need?

The following is a list of the important details a creditor will need to have ready to complete a Proof of Claim form in a bankruptcy case:

• Debtor's Information : Debtor's Name and the relevant Bankruptcy Case Number
• Creditor's Information : Name of contact person, contact information (including phone, email, and mailing address)
• Classification Section of the Claim : select either Secured, General Unsecured, or Priority Unsecured
• The  amount owed  as of the Petition Date
• Basis of the claim:  with documents provided to support the claim such as invoices of goods or services purchased, delivery receipts, contracts, loan or credit card balance, legal settlements, etc)
• Attach documentation  that shows an itemization of charges to demonstrate the claim amount owed
• Signature of the Creditor or an Authorized Representative

How to File a Proof of Claim:

• Identify the Case  - The first thing you will want to do is find out where the debtor has filed for bankruptcy and the case number of their filed case. This information will help attach your claim to the appropriate bankruptcy filing.  Voyager Chapter 11 filing case number is available on the state of Vermont's website .
• Download the Form  - The  Administrative Office of the U.S. Courts   provides the form  for free online.
• Review the Instructions  - the court  lists out the steps  needed to complete your proof of claim. It's useful to take 10 minutes and review them.
• Fill the Form Out -  This can be done on your digital device, or by hand, but fill out the form's questions to the best of your ability. Be prepared to sign the document.
• Attach Copies of Any Supporting Documents  - You will not want to give up the original copies of any supporting documents with your filing in case they are lost or damaged. Instead, the court asks that you attach redacted copies of any documents that show that the debt exists, a lien secures the debt or both.
• File it with the Appropriate Court -  As the creditor, you must file the form with the clerk of the same bankruptcy court in which the bankruptcy case was filed.  In this case, Voyager   filed in the United States Bankruptcy Court for the state of Vermont.

You have several options to submit your filing.

• Submit your Proof of Claim by Mail -  The state of Vermont Bankruptcy Court accepts mail at : Department of Financial Regulation Consumer Services, 89 Main Street, Montpelier, VT 05620
• Submit an Electronic Proof of Claim  - The court provides a  website  you can file the claim through.

Of course, if you want assistance, you can always  generate and file your claim  with Dispute in 5 minutes from your phone or computer.

When Do I Need to File My Proof of Claim?

The last possible date that creditors are allowed to file their Proof of Claim against a Debtor in a bankruptcy case is known as the  Bar Date . This is effectively the deadline for creditors to adhere to the bankruptcy claims timeframe through timely submissions of Proof of Claim to be accepted by the court.

A creditor may receive a "Notice of the Bar Date" in their formal notice of bankruptcy filing issued by the bankruptcy court. This same notice will include the Proof of Claim form and instructions for how to fill it out and submit it properly. You can also call the court and request the bar date information from the local clerk.

Proof of Claim forms that are filed after the bar date are usually rejected and not given any consideration by the court. For this reason, it is advisable to file a Proof of Claim well before the bar date so as not to risk the court's consideration of the validity of the Proof of Claim.

As of the writing of this article, a bar date had not been set for the Voyager bankruptcy.

What Happens After I File?

Once you have successfully filed a Proof of Claim, you can confirm that it was received by the bankruptcy court by enclosing a stamped self-addressed envelope and a copy of the completed form, and the court will return a stamped confirmation to you in the mail.

Alternatively, you can visit the website of the bankruptcy court's  PACER system  to review the submission. For Proofs of Claims that were filed electronically, an online confirmation will be provided as a receipt.

What happens next is, unfortunately, not so simple, and the legal proceedings of a Chapter 11 bankruptcy case can take many steps before a Plan of Reorganization is approved and claim payouts are ultimately distributed. You may want to consult with an attorney for advice.

But, by submitting a valid  Proof of Claim  to the court, you can rest assured your bankruptcy claim is accurately represented in the case, and that you have a legal right of recourse against Voyager .

Other Frequently Asked Questions:

What kind of bankruptcy proof of claim am i filing.

There are four types of claims:

• Secured Claim  - a secured claim is debt supported by collateral or a lien on a specific property of the debtor. The classification of secured claims is given priority in the bankruptcy claims process, meaning they have the right to be paid from the available funds or bankruptcy estate before other creditor classes are paid out.
• Unsecured Claim  - is, by definition, one that does not meet the requirements of a secured claim. Simply put, unsecured claims are debts not guaranteed by collateral or a lien on the debtor's assets.
• Priority Claim  - debt entitled to special treatment in the bankruptcy claims process and will get paid ahead of unsecured non-priority claims. A debtor must pay out a priority claim in full and with cash under the Chapter 11 Plan unless a creditor agrees to different terms.
• employee compensation
• unpaid contributions to employee benefits plans
• tax obligations owed to the government
• pending personal injury or workplace injury or death claims
• certain deposits are given to the creditor to secure future goods or services
• alimony and child support
• the costs of administering the bankruptcy case (e.g. professional accounting and legal fees)
• Non-Priority Claim  - If an unsecured claim does not fall under any of the categories above, then it may be considered a non-priority.

What happens if I miss the Bar Date?

If you miss the bar date, you must convince the bankruptcy court that there is a legitimate reason for filing late and missing the bankruptcy claims timeframe. It is possible to request that the Debtor ( Voyager ) file the Proof of Claim on your behalf. However, in this case, it is up to the creditor to show your reasoning to the court.

Under extenuating circumstances, a creditor can also file a late Proof of Claim and have it accepted by the court. However, the strict criteria and subsequent dealings with the court to excuse the failure to meet the bar date can make it challenging.

If you have any additional questions about filing a bankruptcy Proof of Claim against Voyager, please don't hesitate to   reach out .

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Voyager Digital Assets: Will Anybody Get Their Crypto Back?

Written by: anthony j. maresco.

Who is Voyager and Why Did It Enter Chapter 11? Voyager Digital Assets, Inc. (the “Company”) is a cryptocurrency brokerage and lending firm. It offers typical brokerage services, matching accountholders with counterparties who are willing to engage in certain cryptocurrency transactions. The Company also provides custodial and lending services. At bottom, these services make Voyager function like an unregulated bank. Depositors store their cryptocurrency with the Company, and, in turn, Voyager loans it out to borrowers. The Company then pays the interest they make on the loans to the depositors.

Voyager filed its Chapter 11 petition on July 5, 2022, in the Southern District of New York. In its First Day Declaration, the Company cited a “run on the bank” as the primary reason for its bankruptcy. To understand the “run on the bank” effect, it is crucial to consider how traditional and cryptocurrency markets have fared throughout 2022.

This year has been an unsuccessful one for investors. As of July 2022, the S&P 500 index has declined by approximately 665 points since January. Cryptocurrency is no stranger to the market downturn either, as it has lost $3 trillion of market value. Factors such as the effects of the COVID-19 pandemic, high inflation, the War in Ukraine, and the crash of the Terra Luna coin have all contributed to a mass crypto selloff in 2022.

In Voyager’s case, market volatility and the default of a major loan caused its fall into Chapter 11. Due to the market collapse, many depositors tried to withdraw their funds from the Company to save what they could. Voyager, however, did not have enough liquidity to pay out. Additionally, one of Voyager’s main borrowers, a Singaporean hedge fund called Three Arrows Capital (“3AC”), defaulted on its $650,000,000 loan. With no money coming in from a major borrower, coupled with a large number of depositors withdrawing their funds, Voyager restricted all customer trading and filed for Chapter 11 bankruptcy.

Photo curtesy of The Crypto Times

Voyager’s Path Forward Voyager submitted its Chapter 11 plan with its First Day Declaration. The proposed plan would give accountholders (1) whatever crypto coins remain in Voyager’s possession, roughly $1.3 billion (2) new equity in a reorganized Voyager (3) any amount of the recovered loan from 3AC, and (4) VGX coins, a digital currency created by Voyager. Under this plan, accountholders will probably not recover 100% of their money. Voyager did indicate, however, that it would be open to a possible transaction with a third-party investor.

Crypto billionaire, Sam Bankman-Fried has expressed interest in buying Voyager out of bankruptcy and taking their customers along with him to his trading platform, FTX. His proposal to Voyager promised accountholders an advance payment on their bankruptcy claims, essentially enticing them with quick money as the bankruptcy process plays out. Voyager’s lawyers responded to the deal, calling it a “low ball bid dressed up as a white knight rescue that only benefits FTX.” For Bankman-Fried, the deal would be beneficial because he would get new customers on his FTX platform at no cost. Conversely, he takes the risk of acquiring a failing company due to market volatility.

From Voyager’s perspective, it makes sense to hold off on Bankman-Fried’s offer. Before the crypto market tanked, the Company did have a successful business plan, and court filings indicate that over eighty parties have engaged the Company regarding a potential transaction. As follows, a better deal for Voyager may arise as the bankruptcy process moves forward. Bankman-Fried’s deal probably sounded attractive to accountholders though because it would provide liquidity to accountholders who do not have access to any of their funds.

Implications of Voyager’s Bankruptcy Voyager is the first massive crypto company to file bankruptcy, so this case will set an important precedent for other companies that file in the future. One critical question that came up in the First Day Hearing was whether the crypto assets held by Voyager are property of the bankruptcy estate, or property of the individual accountholders. If the assets are part of the bankruptcy estate, they will be distributed to unsecured creditors. For accountholders, this outcome would require them to file claims against the bankruptcy estate to recover part of their money. On the other hand, if the assets are the property of the individual accountholders, they would most likely be entitled to their entire deposit.

In sum, the million-dollar question in this case is: how much money will Voyager depositors actually recover? Given the proposed restructuring plan, it will almost certainly not be 100% of their original deposit. As the Company moves through Chapter 11, we may see a deal close, or the Company may stick with its initial plan. Whatever the outcome, this restructuring will set an important precedent for other crypto bankruptcies that happen in the future.

Bracewell LLP et al., Voyager: The Convergence of Chapter 11 and the Crypto Winter , JDSUPRA (July 28, 2022).

Fran Velasquez, Is FTX Proposal Offering Voyager Customers a Good Deal? One Bankruptcy Expert Weighs In , Coindesk (July 25, 2022).

In re Voyager Digital Holdings Inc., Case No. 22-10943 (Bankr. S.D.N.Y. 2022).

Ryan Deffenbaugh, Crypto bankruptcy plunges the industry into uncharted territory , Protocol (July 15, 2022).

Sam Reynolds, Failed Lender Voyager: ‘No Customer Will Be Made Whole’ Under FTX Proposal , Coindesk (July 25, 2022).

Wai L. Choy et al., The Other Side of the Coin: Cryptocurrency Assets in Bankruptcy , The Nat’l L. Rev. (July 15, 2022).

I may have lost my life savings to the crypto crash, and I can't believe I ever thought this was a good idea

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• I bought tens of thousands of dollars of USDC, a stablecoin, through Voyager, which promised 9% APY.
• The company filed for bankruptcy last week and suspended withdrawals on its platform.
• Voyager claimed users' funds were FDIC-insured, but they weren't, and now my money may be lost.

Last year, a friend told me about a cryptocurrency that yielded an astonishing 9% APY interest rate through an investing app called Voyager. 

At first I was skeptical. Cryptocurrency seemed so volatile and companies seemed so sketchy. I dismissed the idea, until my friend told me that the currency was a stablecoin, which means its value doesn't change. The coin in question, USDC, was tied to the US dollar (meaning 1 USDC was worth $1 USD), so Voyager was basically offering a very high-yield savings account. 

More curious now, I decided to put in a little money, less than $200, and see what would happen when the month was up. Typically, to make money with crypto, you have to buy the coin before its price shoots up then sell at a profit. But with the USDC coin purchased through Voyager, I thought I was buying a coin with a stable price. My assumption was that, like any bank, Voyager wanted my cash and was willing to pay me to hold it with them via USDC.

In the beginning of September 2020, I saw my first interest deposit: a 1.50 USDC "reward," which I could then sell and receive $1.50 USD in return. So I decided to add more money. And then thousands more. In the past two years, I've earned steady, high yields, and regularly taken money out of my Voyager account to pay bills. 

The last time I deposited USD was on June 10, just two days before another crypto app, Celsius, announced it was freezing withdrawals , thus knocking over the first domino in an industry-wide semi-collapse. On July 1, Voyager did the same. 

Crypto was just too good to be true

Voyager filed for bankruptcy protection last week. And, like 3 million other crypto investors, my funds remain inaccessible. When I try to sell my USDC and withdraw my money, a message pops up that says trading is currently disabled. If it's true that the money is gone, as many fear, it means I've just lost tens of thousands of dollars I could've used to pay off my student loans. 

If I had the chance, would I do this all again? Definitely not.

Platforms like Voyager made buying these funds easy. Instead of going through the complicated process of creating my own cold wallet to store my cryptocurrency, I could simply create an account on Voyager and use the app like any other bank or crypto exchange. It also didn't require much knowledge of how cryptocurrency worked. 

And it seemed safe. My money was, I believed, insured by the Federal Deposit Insurance Corporation (FDIC) because Voyager said it was. I was so excited about it that I told friends and family. I'd even wanted to write about it.

The cryptocurrency market has proven itself volatile, but for a while, stablecoins like USDC were — and perhaps still are — a solid way to save money in the midst of growing inflation and weak yields in traditional savings accounts. It's like flying in the jetstream of crypto-mania without facing the same risks. Or so I thought. 

It turns out, at least in my case, it was too good to be true. Maybe crypto is here to stay, but I'm done participating for now.

Digital currency is still the Wild West

It's now clear that investors never got the full picture. Metropolitan Commercial Bank, the source of Voyager's claim that cash held in Voyager was FDIC-insured, issued a statement that any dollars users had in their accounts were protected only in the case that Metropolitan Commercial Bank failed, not Voyager. 

This means that there's a good chance my money is gone, or I'll somehow only receive a fraction of what I once held. I'm in a unique, privileged position that is allowing me some semblance of sanity, even though it hurts — I don't have kids, am in my early 30s, and was already packing up to travel to cheaper countries. For some, the stakes are much higher. Last week, I saw a tweet from a panicked single mother who had $70,000 in the app saved to buy a house. Many people have six figures or more saved in the same way I did.

The FDIC is now investigating Voyager for its claim that funds were insured. I feel a little less silly and a little more angry. Still, there's little I can do. I agreed to terms and conditions that bar users from participating in class-action lawsuits. 

I've learned my lesson — I won't invest in crypto again until there's adequate government regulation and I would not keep cryptocurrency in an online exchange but in a personal wallet. When I invest again, I'll go back to index funds , CDs, real estate, and a regular high-yield savings account , much as it hurts to see my savings essentially losing value over time. 

USDC and Voyager looked like a savvy choice. But I see now that I did not have the information I needed to make a wise decision.

I'm still wondering if there's a future for crypto

Bill Gates has said he thinks cryptocurrencies and NFTs are "100% based on greater fool theory." It's possible that actually using cryptocurrency as currency could one day be mainstream, making it more legitimate and tied to something that's actually real, but I don't think we're very close to that. 

Crypto is just too unknown, too open to hackers, and too complicated for the average person who is used to easy-to-use tech. Next time I see sky-high APYs and jargon so complex I can barely Google it, I'll run in the other direction.

• Main content

They Lost Crypto in the Crash. They’re Trying to Get It Back.

In a frenzied effort, investors are trying to recover lost funds from Celsius Network, a crypto firm that imploded this summer.

Jon Dimetros is a Celsius custody-account holder who is involved in raising money to help get depositors’ funds back. Credit... Jamie Kelter Davis for The New York Times

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By David Yaffe-Bellany

David Yaffe-Bellany, who covers crypto, has written extensively about the market crash that wiped out nearly $1 trillion this year.

• Published Aug. 18, 2022 Updated June 22, 2023

Listen to This Article

David Little was starting to lose hope. Like thousands of other investors, he had lost a large chunk of his cryptocurrency savings — a sum that once accounted for more than half his net worth — when the experimental crypto bank Celsius Network filed for bankruptcy this summer.

Then he had an idea. In July, Mr. Little, a 35-year-old engineer in Houston, wrote a letter to the U.S. Bankruptcy Court for the Southern District of New York, arguing that he and others who had deposited their digital currencies in a special type of Celsius account should be able to withdraw the funds. Soon he started getting calls from fellow depositors — a man who was struggling to pay rent, a woman who had lost her retirement savings.

Mr. Little started a group chat that grew to include hundreds of Celsius customers. Within days, they raised $100,000 to hire the law firm Togut, Segal & Segal to press their case in court.

“If I do become part of the cautionary tale in crypto, I’ll know I didn’t just sit by and do nothing,” Mr. Little said.

The company’s implosion was one of the most damaging episodes of this summer’s crypto crash , a moment of reckoning that exposed the industry’s risky practices and ruined thousands of investors. Celsius customers alone lost $5 billion, and the firm’s collapse sent tremors across the digital currencies market, tanking the price of Bitcoin and Ether.

Now the crash has entered a crucial new phase: a frenzied rush to recover lost funds. The effort stretches beyond Celsius, as the amateur traders who bet on a range of failed crypto projects seek compensation, file lawsuits and mobilize online. At the same time, some of the industry’s most powerful firms are examining what’s left of the distressed companies in a hunt for potential deals.

The stakes are highest for the ordinary investors who lost everything. Celsius depositors are scrambling to salvage even a portion of their savings, congregating in online forums to debate legal strategy and offer emotional support. For weeks, they have flooded the Bankruptcy Court with hundreds of impassioned letters detailing their losses and proposing ideas to maximize recoveries. Apart from Mr. Little’s group, at least one other customer coalition has hired a lawyer to recover a share of Celsius’s remaining assets, an unusual show of grassroots activism for a bankruptcy case.

“I’m astounded by how fast and furious some of the creditor bodies are forming,” said Thomas Braziel, a partner at the investment firm 507 Capital, which specializes in bankruptcy. “Usually in bankruptcies with really small claimants, they get absolutely hosed by big law firms and the debtor.”

The recovery efforts have gained steam as the cryptocurrency market has gradually stabilized. The price of Bitcoin rose to about $25,000 this week from a low of $18,000 in June, though it remains more than 60 percent off its peak of roughly $68,000 last November.

Whether the grassroots organizing and back-room dealmaking will lead to substantial payouts for people who lost money remains uncertain. The Celsius case is complex, and historically, investors who have lost cryptocurrencies in a corporate collapse have struggled to get them back. The 2014 bankruptcy of Mt. Gox , an early exchange, cost investors billions and led to years of legal wrangling.

Customers hope Celsius’s bankruptcy will be less drawn out. For years, Alex Mashinsky, the crypto bank’s founder, trumpeted an opportunity that seemed too good to pass up: savings accounts where people could deposit cryptocurrencies and receive annual yields as high as 18 percent. In weekly “ask me anything” videos, he cast Celsius as a populist alternative to traditional banks, which have federally insured deposits that pay much less interest.

Mr. Mashinsky’s pitch turned Celsius into a sensation. Last year, the company, which is based in New Jersey, had one million customers and managed assets worth $20 billion.

A crypto enthusiast, Mr. Little put most of his Bitcoin into Celsius in early 2021. (He declined to reveal the total value of his deposit.) “This had been such a trustworthy platform,” he said. “It wasn’t anything near what was advertised.”

To generate its 18 percent returns, Celsius took risks, investing customer deposits in experimental crypto products, according to court papers. (The company did not respond to a request for comment.) In June, the market crash set off the equivalent of a bank run, forcing Celsius to halt withdrawals and eventually file for bankruptcy.

In legal documents, Celsius reported that it had $4.3 billion in total assets but $5.5 billion in liabilities, including $4.7 billion it owed to customers. That gap will make it difficult for Celsius to return its users’ deposits. In one of hundreds of letters sent to the Bankruptcy Court, a couple in Australia, Katie and Christopher Davis, said they had put about $150,000 into Celsius, hoping to use the money to start a family.

“That was our life savings,” they wrote. “It was our chance of having a baby.”

The fate of those funds now depends on a complex legal process that will take months to unfold.

In court, lawyers for Celsius have cited the terms of use that customers signed to argue that most depositors transferred ownership of their cryptocurrencies to the company. That assertion has major legal ramifications: If the judge rejects the company’s argument and determines that the company was merely storing its customers’ property, then the firm would have to return what remains of those deposits immediately.

Celsius is pursuing alternate routes to pay back customers and even restart the business. The company has a Bitcoin mining operation, which its lawyers say could help generate funds for depositors.

Mr. Little is pushing for a faster resolution. Before Celsius’s bankruptcy, he moved his savings from one of the company’s popular interest-bearing accounts to a “custody” account that did not offer interest and was supposed to provide a safe method of storage.

About 58,000 customers held cryptocurrencies in the company’s custody accounts. The lawyer whom Mr. Little’s group hired, Kyle Ortiz, plans to argue that those funds — worth $180 million — remain the customers’ property under the terms of service.

For Celsius’s interest-bearing accounts, that would be a difficult case to make, legal experts said. But custody holders have a better shot, because the contractual language appears more favorable.

“The custody customers have a decent chance of prevailing and getting their money back,” said Adam Levitin, a bankruptcy professor at Georgetown Law.

At a hearing on Tuesday, a lawyer for Celsius, Joshua Sussberg, offered further reason for hope. The company is working to to resolve the custody issue, he told the judge, and potentially get those assets “back to customers.”

Celsius depositors are tracking the case closely. The demand to view a livestream of the hearing was so high that the Bankruptcy Court had to borrow another court’s Zoom link to accommodate the roughly 500 people who logged in. In Telegram group chats, the customers offered a running commentary on the proceedings, posting fire emojis when Mr. Sussberg suggested that custody recoveries were likely.

The custody initiative is one of several efforts by Celsius customers to recoup deposits. In federal bankruptcy cases, the Justice Department appoints a committee of creditors to represent the interests of the people to whom a company owes money. But individuals or groups of creditors can also hire their own lawyers to pursue narrower aims.

A full recovery for the custody group would help only a small portion of Celsius users, leaving the rest to consider other legal strategies.

“There are other groups who are starting to follow suit,” said Jon Dimetros, a custody-account holder who’s involved in fund-raising efforts. “Just to make sure there’s a level playing field.”

Celsius is also attracting interest from possible buyers. Last week, the crypto company Ripple said it was “interested in learning about Celsius and its assets, and whether any could be relevant to our business.”

An acquisition would present its own complications.

Last month, Sam Bankman-Fried, the chief executive of the crypto exchange FTX, offered to buy crypto from Voyager Digital, a digital-asset company that collapsed at the same time as Celsius, and then transfer an unspecified amount of cash to Voyager’s customers. He framed the proposal as a way to swiftly resolve the process and avoid years of costly court fights. Voyager rejected the plan, calling it a “low-ball bid dressed up as a white knight rescue.”

Changpeng Zhao, the chief executive of the crypto exchange Binance, said both Celsius and Voyager had approached his company to discuss selling some of their assets. “Our team’s engaging in all of those conversations,” he said in an interview.

Regardless of whether an outside bidder emerges, a resolution in the Celsius case is unlikely any time soon. Mr. Little said he was prepared to wait for the savings he lost.

“It was a very, very long-term hold,” he said. “This was something that was potentially going to go to my daughters.”

In June, he tried moving his funds out of Celsius, but the transfer never went through. Now when he checks his account, the uncertainty is expressed in a single word: “Pending.”

Audio produced by Parin Behrooz .

David Yaffe-Bellany covers cryptocurrencies and financial technology. He graduated from Yale University and previously reported in Texas, Ohio, Connecticut and Washington, D.C. More about David Yaffe-Bellany

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April 22, 2024

After Months of Gibberish, Voyager 1 Is Communicating Well Again

NASA scientists spent months coaxing the 46-year-old Voyager 1 spacecraft back into healthy communication

By Meghan Bartels

NASA’s Voyager 1 spacecraft is depicted in this artist’s concept traveling through interstellar space, or the space between stars, which it entered in 2012.

NASA/JPL-Caltech

After months of nonsensical transmissions from humanity’s most distant emissary, NASA’s iconic Voyager 1 spacecraft is finally communicating intelligibly with Earth again.

Voyager 1 launched in 1977 , zipped past Jupiter and Saturn within just a few years and has been trekking farther from our sun ever since; the craft crossed into interstellar space in 2012. But in mid-November 2023 Voyager 1’s data transmissions became garbled , sending NASA engineers on a slow quest to troubleshoot the distant spacecraft. Finally, that work has paid off, and NASA has clear information on the probe’s health and status, the agency announced on April 22.

“It’s the most serious issue we’ve had since I’ve been the project manager, and it’s scary because you lose communication with the spacecraft,” said Suzanne Dodd, Voyager project manager at NASA’s Jet Propulsion Laboratory in an interview with Scientific American when the team was still tracking down the issue.

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The Voyager 1 spacecraft is a scientific legend : It discovered that Jupiter’s moon Io, far from being a dead world like our own companion, is instead a supervolcanic world . The craft’s data suggested that Saturn’s moon Titan might have liquid on its surface. And for more than a decade, Voyager 1 has given scientists a glimpse at what space looks like beyond the influence of our sun.

Yet its long years in the harsh environment of space have done a number on the probe, which was designed to last just four years. In particular, degraded performance and low power supplies have forced NASA to turn off six of its 10 instruments, and its communication has gotten even spottier than can be explained by the fact that cosmic mechanics mean a signal takes nearly one Earth day to travel between humans and the probe.

When the latest communications glitch occurred last fall, scientists could still send signals to the distant probe, and they could tell that the spacecraft was operating. But all they got from Voyager 1 was gibberish—what NASA described in December 2023 as “a repeating pattern of ones and zeros.” The team was able to trace the issue back to a part of the spacecraft’s computer system called the flight data subsystem, or FDS, and identified that a particular chip within that system had failed.

Mission personnel couldn’t repair the chip. They were, however, able to break the code held on the failed chip into pieces they could tuck into spare corners of the FDS’s memory, according to NASA. The first such fix was transmitted to Voyager 1 on April 18. With a total distance of 30 billion miles to cross from Earth to the spacecraft and back, the team had to wait nearly two full days for a response from the probe. But on April 20 NASA got confirmation that the initial fix worked. Additional commands to rewrite the rest of the FDS system’s lost code are scheduled for the coming weeks, according to the space agency, including commands that will restore the spacecraft’s ability to send home science data.

Although, for now, Voyager 1 appears to be on the mend, NASA scientists know it won’t last forever. Sooner or later, a glitch they can’t fix will occur, or the spacecraft’s ever dwindling fuel supply will run out for good. Until then NASA is determined to get as much data as possible out of the venerable spacecraft—and its twin, Voyager 2, which experienced its own communications glitch earlier in 2023 .

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