Alameda Research, the trading arm of Sam Bankman-Fried’s bankrupt crypto exchange FTX, is seeking to recoup about $446 million in loan payments from similarly bankrupt crypto lender Voyager Digital.
According to a filing in Delaware bankruptcy court Monday, FTX — filing on behalf of Alameda — said that before Voyager filed for bankruptcy in July, it provided loans to Alameda, which Alameda repaid before it, too, filed for bankruptcy in November. Now, Alameda is trying to get those payments back, potentially to repay some of FTX’s other creditors.
FTX and Alameda offered to buy all of Voyager’s assets and loans last July, ostensibly to provide liquidity to Voyager’s customers, but Voyager rejected the offer, calling it a “low-ball bid dressed up as a white knight rescue.”
In September, FTX won the bidding for Voyager’s post-bankruptcy assets for about $1.4 billion.
Two months later, FTX declared bankruptcy and Bankman-Fried resigned as CEO; he has since been indicted in a multibillion-dollar fraud case, which includes allegations that Alameda took money from FTX customers to pay for its risky bets. Former Alameda CEO Caroline Ellison pleaded guilty to fraud in December and is said to be cooperating in the case against Bankman-Fried.
In Monday’s court filing, FTX accused Voyager of being part of the problem.
“Largely lost in the (justified) attention paid to the alleged misconduct of Alameda and its now-indicted former leadership has been the role played by Voyager and other cryptocurrency ‘lenders’ who funded Alameda and fueled that alleged misconduct, either knowingly or recklessly,” the filing said, alleging that “Voyager’s business model was that of a feeder fund. It solicited retail investors and invested their money with little or no due diligence in cryptocurrency investment funds like Alameda and Three Arrows Capital.”
(Crypto hedge fund Three Arrows declared bankruptcy in July.)
Read More
In what appears to be a spectacularly daring move, Samlyn Ng, a Partner at Alameda Research, a cryptocurrency and digital asset subsidiary of San Francisco-based asset management firm Susquehanna International Group (SIG), tweeted on May 23, 2021 about the company’s intention to “reclaim $446 million in loan payments” from Voyager Digital – a crypto brokerage platform.
The blockbuster news of Alameda Research’s pending legal action against a highly-publicized firm exposes us to the complexities of the blockchain industry and its inevitable entanglement with the legal system.
The ordeal first began when Voyager Digital acquired Circle’s crypto trading business, Poloniex, in February of this year. Alameda financed the $400 million acquisition through what is now known as a “loan transaction” that has yet to be fully re-paid.
Alameda’s legal team is alleging that Voyager committed fraud by failing to comply with the loan transaction and lending agreement. The company is requesting full compensation for the entire $446 million loan amount that was expected to be paid in multiple installments.
The blockchain industry continues to develop and face a range of regulatory challenges and legal issues that arrive with the increasing use and adoption of cryptos.
It remains to be seen how this story will unfold, but it certainly serves as a reminder of the importance of effective and prudent legal and contractual measures to avoid such costly and public disputes. It also reveals that companies involved in the blockchain industry are beginning to feel the brunt of having to adhere to the strict legal structures that have long been present in traditional markets.
This lawsuit is a signal that major players in the blockchain ecosystem are beginning to take legal action to protect their investments and enforce their contractual agreements. It is expected that the case will be closely followed, as it will have significant consequences for the crypto asset industry — and set a valuable precedent for future transactions and disputes.
