Crypto broker Voyager Digital limits investors’ withdrawals to $10K
Stung by crypto’s malaise and ties to the Luna collapse, Voyager Digital lowers the limit to $10,000 as its stock falls overseas. Are investors just stuck?
There’s trouble for investors at another cryptocurrency broker. Voyager Digital placed a $10,000 limit on daily withdrawals overnight, stung by the overall market malaise and continued fallout from the Terra Luna collapse. The limit had been $25,000.
Voyager Digital saw its stock, traded in Toronto and over the counter in the US, drop some 40% Wednesday after the company warned of a potential default on a $665 million loan to Three Arrows Capital, a crypto-trading hedge fund. Three Arrows is reportedly looking for a way out of a cash squeeze after losing some $200 billion in the Luna collapse.
Users took to Twitter to voice their frustration. “What didn’t get announced was Voyager decided to reduce my withdrawal limit without notifying me,” read one post. “Not your keys, not your coins,” read another, citing a common crypto warning.
But, as with the recent freeze by Celsius on all withdrawals impacting billions in investor assets, it’s not clear investors have any recourse.
Trouble in the industry
The plunge in crypto values – crypto market cap has dropped about two-thirds from the peak of last fall – has caused a lot of turmoil for crypto related companies.
US-traded Coinbase (CB) has announced layoffs of 18% of its workforce, and its stock is down 84% since its April 2021 IPO.
Crypto.com, Block Fi and Gemini have also announced layoffs recently, though some others do say they are hiring.
One rescuer has emerged. FTX, the crypto exchange run by billionaire Sam Bankman-Fried, agreed this week to provide credit to BlockFi, after reports of big losses and the announcement BlockFi would lay off 20% of its staff.
He tweeted, “We take our duty seriously to protect the digital asset ecosystem and its customers.”
6) We take our duty seriously to protect the digital asset ecosystem and its customers.
— SBF (@SBF_FTX) June 21, 2022
Bankman-Fried also recently became a major investor in Voyager, and through one of his companies offered a credit line as well. In fact, his recent moves with a variety of investments around the industry led CNBC to say he’s become “something of a savior” for crypto markets in this downturn.
The Luna fallout
Along with the general malaise, Voyager’s issues stem directly from what happened with the Terra ecosystem.
What’s now Luna Classic (LUNC) was tied to Terra’s algorithmic stablecoin TerraUSD. Basically, TerraUSD was leveraged with Luna coins as a way to keep its value at $1. When TerraUSD fell below that peg, Luna coins were created and sold in vast numbers to prop it up. It didn’t work. Luna’s value fell from near $120 in April to basically worthless in mid-May.
Those invested in it, including Three Arrows and everyday investors who held the coin, lost big. Voyager, a lender to Three Arrows, was hit in turn. While Three Arrows appeared small when its woes first hit the news, the impact may run deep.
Meanwhile, news reports say a variety of regulators are now looking into the Celsius withdrawal freeze. That could potentially extend into other brokers that freeze or limit withdrawals, but don’t expect any immediate action.
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