Domino effect: how the collapse of a single hedge fund brought down a crypto platform with millions of clients (Voyager Digital)

Voyager Digital positioned itself as a convenient and safe broker for retail cryptocurrency investors, even hinting to clients at bank-style deposit protection — a claim that would later force a regulator to step in. But behind this facade lay a critical concentration of risk: the platform had lent 60% of its loan portfolio to a single counterparty — the hedge fund Three Arrows Capital (3AC) — which failed to repay $650–666 million in debt. On 5 July 2022, Voyager filed for bankruptcy, becoming one of the most prominent victims of the domino effect that swept through the crypto market that summer.

Voyager attracted clients with the image of a reliable, regulated broker — the platform, in particular, publicly positioned itself in a way that led clients to believe their dollar deposits were insured by analogy with bank accounts, for which it later received an order from a regulator to stop misleading clients about deposit insurance. This apparent reliability drew in deposits, which were then channeled into lending to institutional counterparties.

The largest and riskiest of such counterparties was Three Arrows Capital — it accounted for nearly 60% of Voyager's entire loan portfolio, including a loan in the form of 15,250 BTC and $350 million USDC. When the Terra/LUNA collapse and the general market decline hit 3AC's positions in the spring and summer of 2022, the fund was unable to meet the margin calls on its own debt obligations.

On 27 June 2022, Voyager officially declared 3AC in default on the outstanding loan; that same day, a court in the British Virgin Islands ordered the fund's liquidation. Unable to cover this hole in its own balance sheet, Voyager filed for Chapter 11 bankruptcy on 5 July 2022.

Approximately $270 million was returned to clients through the bankruptcy proceedings, with the remaining assets distributed gradually as part of a reorganization plan that included the distribution of crypto assets, shares in the reorganized company, and a stake in the claims against 3AC. There are no criminal convictions against Voyager's own management; at the same time, the founders of 3AC faced separate legal consequences for refusing to cooperate with the fund's liquidators.

Published 14 February 2025