Yahoo Finance’s David Hollerith joins the Live show to report that Voyager Digital has filed for bankruptcy after suspending consumer withdrawals earlier in the week.
BRIAN SOZZI: The crypto winter continues to thin out. The herd in the industry, crypto brokerage Voyager Digital has filed for chapter 11 bankruptcy protection. Yahoo Finance's crypto reporter David Hollerith has been tracking this story for us. And David, new day, same old story in crypto.
DAVID HOLLERITH: That's true. You know, these bankruptcy filings are mounting, Brian. And Voyager filed last night. Stephen Ehrlich, the-- Voyager's chief executive officer, cited the prolonged volatility and contagion which has been spreading around the crypto markets over the last few months.
He also cited Three Arrows Capital, which has a loan, outstanding loan, of money it borrowed from Voyager. Now, Voyager has filed a court claim in the British Virgin Islands to try and recover that money.
And under the assumption that they can recover part of the $650 million outstanding loan that Three Arrows owes Voyager, they plan to repay customers in full in cash and crypto assets. But again, those plans are sort of on the pivot of what happens in these bankruptcy discussions.
Just to add a little bit more to that, Voyager holds about $1.3 billion assets, crypto assets on its platform currently, according to the filing. That includes-- it also-- excuse me, it also has $350 million in cash and $110 million it's using to stave over operations during bankruptcy.
Now, the firm did halt transactions on Friday and it will continue to do so as the bankruptcy proceedings progress. Voyager is also traded-- shares of Voyager also traded on the Toronto Stock Exchange. And those shares have been halted this morning after falling 99-- excuse me, almost 99% since their peak in November.
BRAD SMITH: David, while we have here, I wanted to get what you know in your perspective on what the FTX company is pressing for here on a separate topic of crypto derivatives and the approvals that they're seeking.
DAVID HOLLERITH: Right, yeah, this is sort of a longer term discussion. FTX has a new model for trading derivatives, crypto derivatives in the US. However, the model is going to disrupt sort of the typical or traditional system for how derivatives are cleared using a third party for settlement.
Now, FTX already uses this model for its international exchange. This is more so, so that it can apply the same rules in the US. So the big thing here is that this is a proposal that changes the game in how derivatives are cleared in the US and quite possibly it could disrupt the existing model. Which derivatives, even though they're used for cryptocurrencies, are also used for you know, much less risky assets or sort of for people who are not necessarily day trading such as farmers, and agriculture, things like that.
So this is a sort of a contentious topic. There's lobbying on both sides. And proposal will not come from the CFTC for some time. However, obviously, the current market volatility plays into all of this and sort of poses, you know, a question about whether or not such a model could be cleared. On both sides they argue this could be more risky or less risky than the current system, so that remains to be seen.