Dive Brief:

• Crypto brokerage Voyager Digital accused billionaire Sam Bankman-Fried of subverting its bankruptcy process by offering to give Voyager customers early liquidity, according to court documents filed Sunday.
• Under a proposal Friday, the Bankman-Fried-owned trading firm Alameda Research would buy all of Voyager’s digital assets and digital asset loans, except loans to hedge fund Three Arrows Capital, in cash at market value. Voyager customers could then open an account with FTX— the exchange Bankman-Fried also owns — with cash from “a portion of their bankruptcy claims.”
• As part of bankruptcy proceedings this month, Voyager proposed a reorganization plan to the court and, in a parallel move, “engaged with more than 80 third-party investors or buyers” about a sale of the company or its assets. Voyager proposed an Aug. 26 deadline for bids, with an auction set for Aug. 29, the Financial Times reported Monday. However, by going public with their offer, FTX and Alameda are effectively “chilling” bids on what was once a confidential process, Voyager said.

Dive Insight:

“Voyager will entertain any serious proposal” related to the bidding process, the company wrote to the court, but Alameda and FTX’s offer “was designed to generate publicity for itself rather than value for Voyager’s customers.”

In its court filing, Voyager specifically takes issue with the currency conversion inherent in Alameda and FTX’s proposal. The Bankman-Fried-owned ventures would hold onto cryptocurrency recovered from Voyager and pass cash value to customers who migrate to FTX. That cuts customers out of the opportunity to accrue future value in crypto — but specifically Voyager’s VGX token, Voyager said.

The Alameda/FTX proposal “would effectively eliminate the VGX token [and] destroy in excess of $100 million in value immediately,” Voyager said, adding the proposal “declares that there is no value in the Voyager platform and intellectual property.”

Beyond that, though, the proposal would leave migrating customers on the hook for capital gains and other taxes connected to the cash conversion, further diluting customers’ recovery.

“No customer will be made whole” under the Alameda/FTX proposal, Voyager wrote in bold text, pointing to language FTX and Alameda used in their press release — specifically, that customers’ FTX balances would stem from “a portion of their bankruptcy claims.”

“The AlamedaFTX proposal is nothing more than a liquidation of cryptocurrency on a basis that advantages AlamedaFTX,” Voyager wrote. “It’s a low-ball bid dressed up as a white knight rescue.”

Bankman-Fried, in a response emailed to Bloomberg, called his companies’ proposal “generous,” adding, “It appears that Voyager’s consultants are attempting to stall out the process, increasing their fees.”

“In the end, we think Voyager’s customers should have the right to quickly claim their remaining assets if they want,” Bankman-Fried wrote in a statement seen by the Financial Times. “They’ve been through enough already.”

Bankman-Fried also stressed that his companies’ offer to Voyager customers would be voluntary.

“Customers are under no obligation to sign up with FTX,” he wrote. “Any customer that does not wish to … would continue to retain all of their rights and claims in the bankruptcy proceedings, but would not receive early access to a distribution on their claim via FTX.”

As for Voyager’s claim that FTX’s offer excludes takers from a rebound in VGX value, Bankman-Fried wrote, “Even those customers who wish to be ‘long’ cryptocurrency should not be forced to do so by holding unsecured claims in a bankrupt company, at least not when there is an opportunity to receive cash immediately.”

Voyager was owed $1.1 billion in total loan obligations, it said in court papers, including $654 million from Three Arrows, which itself went bankrupt on crypto bets related to the TerraUSD and Luna collapses.

Alameda stands as Voyager’s second-largest borrower — after Three Arrows — with loans of $377 million worth of cryptocurrency. Alameda also lent Voyager $75 million as it became distressed. Alameda said it would write off that loan as part of its proposal.