Cryptocurrency billionaire Sam Bankman-Fried’s offer to basically buy out the insolvent crypto brokerage Voyager Digital is “incredibly opportunistic,” according to one bankruptcy expert.
Thomas Braziel, a founder of investment firm 507 Capital, said there are probably a lot of firms, and not just in crypto, that would be interested in helping Voyager restructure. On Friday, crypto exchange FTX and Alameda Research – two firms founded by the 31-year-old Bankman-Fried – offered to buy Voyager’s assets and loans (minus a bad debt to Three Arrows Capital) at cash value and open accounts for its customers on FTX.
“That’s a good deal” for FTX, which would essentially be acquiring customers at zero cost, Braziel said Monday on CoinDesk TV’s “First Mover” program. But possibly not for Voyager or its customers.
“We haven’t seen bids from other players yet,” Braziel said. “The best deal is to try to be patient and let the bankruptcy court process run a full auction," he added later.
Braziel, whose firm specializes in financing distressed debt and participated in the legendary Mt. Gox liquidation, said it’s still the early stages of what will likely be a long bidding process.
Meanwhile, lawyers at beleaguered broker Voyager Digital have since responded, stating the the offer from FTX is a “low ball bid dressed up as a white knight rescue that only benefits FTX.” In response, FTX CEO Sam Bankman-Fried said in a tweet the offer is good and attempts to negotiate will likely hurt consumers.
“The consultants, for instance, likely want the bankruptcy process to drag out as long as possible maximizing their fees. Our offer would let people claim assets quickly,” Bankman-Fried said.
Braziel said other firms are likely to make bids above FTX’s offer. Moreover, Voyager has “a responsibility to market the assets” and weigh options to recoup any value from its balance sheet for investors, employees and its clientele.
“There are other people in the debt structure behind customer count claimants, including the equity holders,” he said.
Braziel, however, said he “doesn’t really support the plan” from FTX, which “out of the box” seemed to captivate customers looking for a quick pay out. He added that Bankman-Fried was overstating the idea that competing restructuring deals would mostly benefit the lawyers involved.
“The best deal is to try to be patient and let the bankruptcy court process run a full auction,” he said. “I think it's just a little short sighted to pick the first deal that came along that provides nothing but liquidity.”
Braziel said Voyager customers could likely expect “50 to 60 cents on the dollar before attorneys fees,” based on his reading of the bankruptcy filing.
At the same time, Braziel said he could understand Bankman-Fried’s strategy, which is essentially to acquire Voyager’s customers at no cost, but take on an “execution risk” in addition to a failing business.
“Crypto native” customers might also see this as an easier option, and may not be interested in going through a complicated litigation process, he said. “Let's just get the crypto back, let's get liquid and start trading again. Let's start DeFi-ing [and] yield farming again,” he added, speaking for a hypothetical trader.
As a debtor, Voyager has a 120-day period to work out a restructuring plan under Chapter 11 bankruptcy law, Braziel noted.
Braziel notes the bankruptcy process could be surprisingly pretty fast in the U.S. and suggested people could be reimbursed and “trading around the holidays."
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