• Voyager Digital conducted a single due diligence call with Three Arrows Capital (3AC) and received a one-page net asset value statement prior to 3AC filing for bankruptcy protection.
• The document dated May 13, 2022 showed 3AC’s NAV at just under $2.4 billion and the call lasted 30 minutes to an hour.
• Other crypto firms such as Genesis Global Holdco, Celsius Network, and BlockFi also reported losses from 3AC’s bankruptcy due to loans they had made.
Voyager Digital Conducts Due Diligence on Three Arrows Capital
Court documents show that prior to Three Arrows Capital (3AC) filing for bankruptcy protection, crypto lender Voyager Digital carried out a single due diligence call with the hedge fund. During this call, Voyager received a one-page net asset value statement dated May 13th, 2022 with 3AC’s NAV at just under $2.4 billion. The length of the call is noted as either 30 minutes or an hour in the court documents.
Losses by Other Crypto Firms Due to 3AC Bankruptcy
The failure of Three Arrows Capital sparked a wave of collapses among other crypto firms who had loaned money to the hedge fund. For example, Genesis Global Holdco reported that its Asia-Pacific unit had lent 3AC $2.4 billion in cash and digital assets, Celsius Network cited loans worth $75 million, and BlockFi also said it suffered “material losses” from the bankruptcy because 3AC was one of its largest borrowers.
Voyager Digital’s Level of Due Diligence
The filings reveal that despite conducting this single due diligence call with 3AC before their bankruptcy filing, Voyager Digital did not have access to any income statements, cash flow statements or balance sheets nor did they carry out any stress testing of 3AC’s liquidity according to multiple employees involved in due diligence interviews conducted by the court documents team including Jon Brosnahan and Ryan Whooley who are respectively Chief Commercial Officer and Treasury Director at Voyager Digital.
Impact on Voyager Digital
Voyager itself filed for bankruptcy protection in July after reporting a $654 million loan to 3AC which accounted for almost 58% of its loan portfolio thus indicating how greatly affected they were by their investment in the bankrupt hedge fund.
Conclusion
It is clear that despite carrying out some level of due diligence before investing in Three Arrows Capital, it was not enough for Voyager Digital or other crypto firms who were left suffering large losses from their investment in this now bankrupt hedge fund.