According to a Wall Street Journal (WSJ) report, crypto lending firm Voyager Digital Holdings Inc. has been granted permission by the U.S. Bankruptcy Court in New York to return $270 million in client funds on August 4. According to the report, Judge Michael Wiles, who oversees Voyager’s bankruptcy, grants the crypto lender to return the clients funds. In his opinion, Voyager had “sufficient grounds” to back up its claim that clients should be allowed access to the custodial fund stored at Metropolitan Commercial Bank. Voyager, one of several companies that failed as a result of the widespread unrest in the crypto market and its ongoing downward trend, filed for Chapter 11 bankruptcy in a New York court last month.
The crypto lender revealed in its bankruptcy filing papers that it had between $1 billion and $10 billion in assets and liabilities, as well as over 100,000 creditors.
The Federal Reserve and the Federal Deposit Insurance Corp (FDIC) issued an injunction to the firm last week, directing it to stop making “false and misleading” promises about the government’s protection of its clients’ cash. Authorities claim that Voyeger only had one bank account, which was at Metropolitan Commercial Bank, and that none of the investors that used its platform were FDIC-insured. In a joint announcement on July 29, the authorities claimed that it appears that these assertions were probably false and depended on customers who entrusted Voyager with their money but did not have immediate access to it.
Crypto lenders like Voyager witnessed a spike in activity during the COVID-19 outbreak, attracting depositors with high interest rates and easy access to loans that traditional banks seldom ever provided. Lenders have suffered from the recent decline in crypto markets, which was brought on by the failure of two significant tokens in May.