Bankrupt crypto-lender Voyager Digital has run into trouble again, this time drawing flak from its creditors. The Official Committee of Unsecured Creditors of Voyager Digital has filed an objection against the crypto-lender’s request for approving a retention bonus for its employees.
According to court filings, the creditors claimed that the justification that Voyager Digital has provided for its “Key Employee Retention Plan” is not sufficient.
The Committee vehemently opposes bonuses for Voyager employees while customers continue to suffer. The Committee’s objection to Voyager’s Key Employee Retention Plan Motion is available at https://t.co/Q1Y3DGrAcO
— Voyager Official Committee of Unsecured Creditors (@VoyagerUCC) August 20, 2022
According to a motion to approve filed on 2 August, Voyager Digital was seeking $1.9 million of its funds to grant bonuses to 38 “non-insider” employees in order to keep them from exploring employment options elsewhere.
The court filing went on to describe the concerned employees as an essential part of the company, with the same working in the “accounting, cash and digital asset management, IT infrastructure, legal” departments.
Lawyers for Voyager Digital argued that recent market events have affected the value of the company’s equity, rendering the stock-based compensation for employees useless. Hence, the lender is seeking a cash retention bonus for said employees as losing them would “harm the restructuring process.”
According to 19 August’s filings, the creditors believe that Voyager employees are “already well-compensated.”
The filing also criticized Voyager’s inadequate efforts to reduce costs through way of layoffs and went on to reference big names from the crypto-industry that ad reduced their workforce amid the crypto-winter. The crypto-lender’s claim that they were at risk of losing the concerned employees was also rubbished by the creditors, citing that only 12 of the company’s approximately 350 employees voluntarily resigned since the petition date.
Lawyers for the creditors committee argued that given the current climate of the crypto-industry and abundance of talent in the job market, replacing lost employees shouldn’t be a problem.
The aftermath of Voyager’s downfall
Voyager’s downfall has only added to an already struggling industry, thanks to the crypto-contagion that saw trillions of dollars vapourize in its wake. What followed was cryptocurrencies trading at record lows due to bank-runs on crypto exchanges, despaired investors who no longer have confidence in the industry, and mounting pressure on lawmakers to address the situation.
While investors can do little to get back their funds and in some cases life-savings, lawmakers have turned the heat up on regulatory agencies, demanding tighter regulation and safeguards in the interest of users.
The result? Increased scrutiny across the industry from regulatory authorities like Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC) and the perfect excuse for market regulators like the Securities and Exchange Commission (SEC) who are looking to overreach their jurisdiction.
How it all started
Voyager Digital is just one name in a long line of crypto-platforms that have succumbed to the crypto-winter. Like in the case of most platforms that have closed shop or filed for bankruptcy, Voyager’s downfall can be traced back to the collapse of Terra Network.
Following defaults from multiple debtors, most notably a $650 million loan default from the now-defunct crypto-hedge fund Three Arrows Capital, Voyager paused all withdrawals and trading activities on its platform on 1 July. It commenced voluntary Chapter 11 bankruptcy proceedings on 6 July.