What is Voyager Crypto and how does it work for beginners?

**What is Voyager Crypto?** Voyager Digital was initially founded as a cryptocurrency brokerage in 2018, allowing users to buy, sell, and trade various cryptocurrencies through a single platform.

**Voyager's Business Model**: The platform operated on a commission-free model, generating revenue primarily through interest on customer deposits and trading spreads.

**Bankruptcy Filing**: In July 2022, Voyager filed for bankruptcy after failing to recover loans made to the hedge fund Three Arrows Capital, highlighting the significant risks associated with lending in the crypto space.

**Regulatory Issues**: Voyager faced scrutiny from regulatory bodies, including the Federal Trade Commission (FTC), which accused the company of misleading customers about the safety of their deposits, claiming they were FDIC insured.

**Customer Impact**: Following the bankruptcy, customers were only expected to recover approximately 35-36% of their holdings, illustrating the volatile nature of cryptocurrency investments and the potential for significant losses.

**Liquidation Plan**: Voyager's liquidation plan was approved by a bankruptcy judge, allowing the company to return about $1.33 billion in crypto assets to customers, emphasizing the complexities of asset recovery in bankruptcy proceedings.

**Acquisition Attempts**: The company's assets were initially targeted for acquisition by Binance US, but the deal fell through, leading to a more complicated liquidation process.

**Settlement with Creditors**: Voyager secured a $484 million settlement to help repay creditors, showcasing the potential for legal action to recover funds in the aftermath of bankruptcy.

**Impact of Three Arrows Capital**: The default of Three Arrows Capital, a major crypto hedge fund, serves as a cautionary tale about the interconnectedness and systemic risks within the cryptocurrency market.

**Legal Proceedings**: The ongoing legal battles and settlements underscore the importance of regulatory compliance and transparency in the crypto industry, as companies navigate the challenges of insolvency.

**Interest Earning Accounts**: Voyager offered interest-bearing accounts for cryptocurrencies, which attracted customers seeking passive income; however, these accounts came with risks, especially under volatile market conditions.

**Volatility of Crypto Assets**: The volatility of cryptocurrencies can lead to rapid fluctuations in asset values, impacting both individual investors and brokerage firms like Voyager.

**Cryptocurrency Insurance**: Despite claims of insurance, many crypto assets lack the same level of protection as traditional banking deposits, making it crucial for investors to understand the risks involved.

**Market Maturity**: The events surrounding Voyager illustrate the growing pains of the cryptocurrency market as it matures, with increasing calls for regulation and consumer protection.

**Blockchain Technology**: Voyager utilized blockchain technology to facilitate transactions, which operates on a decentralized ledger system; this technology underpins the entire cryptocurrency ecosystem.

**Customer Claims**: Customers had to file claims to recover their assets, highlighting the administrative burdens and complexities of asset recovery post-bankruptcy.

**Financial Literacy**: The Voyager case emphasizes the need for increased financial literacy among cryptocurrency investors, particularly regarding the risks and responsibilities of managing digital assets.

**Tax Implications**: Recovering assets from a bankrupt crypto company can have tax implications for customers, as the IRS treats cryptocurrency as property, which may lead to capital gains taxes upon recovery.

**Decentralized Finance (DeFi)**: The Voyager situation has sparked discussions about the role of decentralized finance platforms, which aim to provide alternatives to traditional financial institutions without central authority.

**Future of Crypto Regulations**: The fallout from Voyager's bankruptcy may influence future regulations in the cryptocurrency industry, as governments seek to create frameworks that protect consumers while fostering innovation.