Voyager's Leveraged Trading: The Next Step For Crypto Investors?

Voyager is a mobile crypto broker that offers commission-free trading on more than 100 cryptocurrencies. It does not currently offer leveraged trading, and it filed for bankruptcy in July 2022. Voyager's customers can expect to see an initial 36% recovery of their crypto holdings. The company has a poor rating on Trustpilot, with many users complaining about slow transaction times, poor customer service, and hidden fees.

Voyager's bankruptcy and customer losses

Voyagers Bankruptcy and Customer Losses

Voyager Digital Ltd., a crypto trading platform, filed for Chapter 11 bankruptcy protection in the United States in July 2022. The bankruptcy has sparked concerns among its customers about potential crypto investment losses. The platform's collapse has shaken the crypto industry, with customers fearing they may not get all their money back.

Voyager's bankruptcy has left its 3.5 million customers desperate for answers and seeking to recoup their funds. In a bankruptcy hearing, Voyager users pleaded for their money back, with some having significant amounts of money trapped on the platform, including savings for their children's college education. One customer, Magnolia, had over $1 million trapped on the platform, including $350,000 in savings for her children's education. She expressed her disappointment in Voyager, stating that they had defrauded their customers and were fiscally irresponsible.

The bankruptcy has also raised concerns about customer clawbacks, where the platform may retrieve funds from customers' accounts to repay creditors. According to Shingo Lavine, Voyager's former Chief Innovation Officer, customer clawbacks could potentially affect around 32,000 users. Lavine has urged affected customers to form a community group and take a unified stance against Voyager's actions, similar to the successful approach taken by Celsius Network customers.

While Voyager has unveiled a $1.33 billion recovery plan to liquidate its assets and return the proceeds to creditors, the decision is subject to bankruptcy court approval. The crypto community has received the recovery plan positively, with affected users hoping for reimbursement soon. However, the process of retrieving funds has been challenging for customers, with strict conditions for eligibility. As of the time of the bankruptcy hearing, Voyager held approximately $1.3 billion in crypto assets, $104 million in cash, and a $650 million claim against the now-defunct Three Arrows Capital (3AC).

The issue of ownership has been particularly vexing for customers. In crypto, the mantra "not your keys, not your coins" highlights that rightful ownership of tokens is through the custody of the corresponding private keys. Customers cannot simply demand their money back, even though they viewed the funds as deposits rather than investments. This has led to confusion and a sense of being mislabeled as creditors or unsecured creditors instead of owners of their cryptocurrency.

The company's regulatory status

Voyager Digital Ltd. is a publicly traded company that is licensed as a crypto-asset broker. It is a Canadian company with headquarters in New York.

In 2023, Voyager Digital faced regulatory opposition from the Securities and Exchange Commission (SEC) regarding its proposed deal with Binance.US. The SEC raised concerns about the legality of the deal, particularly regarding the repayment of Voyager's former customers. The deal also faced opposition from New York State's Department of Financial Services (NYDFS) and Attorney General Letitia James, who alleged that Voyager had been unlawfully serving customers in the state, thereby violating New York's virtual currency regulations.

In 2024, the Federal Trade Commission (FTC) reached a settlement with Voyager Digital, charging the company and its former CEO, Stephen Ehrlich, with falsely claiming that customers' accounts were insured by the Federal Deposit Insurance Corporation (FDIC). The settlement bans Voyager and its affiliates from offering, marketing, or promoting any product or service related to handling consumers' assets. The company also agreed to a judgment of $1.65 billion, which will be used to return assets to consumers in bankruptcy proceedings.

In addition to the FTC settlement, Voyager Digital has been dealing with bankruptcy proceedings. The company filed for bankruptcy protection in July 2022, citing volatility in the cryptocurrency markets and a default on a loan made to Three Arrows Capital. Voyager's liquidation plan was approved, allowing the company to return about $1.33 billion in crypto assets to customers. The recovery of funds for customers is expected to be around 35% of their cryptocurrency deposits, with any further distribution depending on future litigation outcomes.

The absence of self-custody for individuals

Self-custody, or non-custodial wallets, allow individuals to store and manage private keys without the help of a third party. This type of custody puts users in charge of their own security and access arrangements. With self-custody, individuals can store their private keys through either 'hot' or 'cold' wallets. Hot wallets are an online means of storage, while cold wallets have no direct access to the internet and are usually stored on physical devices like hard drives or, in certain cases, simply written down or printed on paper. Typically, cold wallets allow for a higher level of control given their offline nature but are slower when it comes to usability and processing speeds.

In the context of Voyager, there is an absence of self-custody for individuals, meaning users cannot secure their crypto assets with a private key that they control. This may be a disadvantage for those who prefer to have direct control over the security of their crypto assets. Instead, Voyager offers custodial services, where the platform directly manages the private keys of its users. While this provides direct accessibility, it also means that individuals rely on Voyager to ensure the protection of their crypto assets. There are security risks to consider, in addition to counterparty risk and potential conflicts of interest associated with offering both custody and trading services.

It is important to note that Voyager has stated that the self-custody feature is "coming soon". This indicates that the platform may be planning to introduce self-custody options for its users in the future.

The absence of coin-to-coin exchanges

Voyager Digital LLC, a subsidiary of Publicly Traded Voyager Digital (Canada) Ltd, is a cryptocurrency brokerage app. It is the only publicly traded pure-play crypto broker (VYGR on the Canadian Securities Exchange). Voyager is committed to providing the best possible customer service and is beta-testing new offerings, including investment and savings accounts, loan products, and margin trading.

Voyager is not a direct market access (DMA) broker, but rather acts as a matchmaker, without holding any proprietary inventory of long or short positions. The company's business model is geared towards growing volumes of crypto trading, with the key revenue source being a bid/offer spread when executing client trades. There are no commissions per se, but withdrawal fees apply to cryptocurrencies as there are network costs.

Overall, Voyager's absence of coin-to-coin exchanges sets it apart from other cryptocurrency platforms and contributes to its unique position as a crypto broker. While this may be a disadvantage for some users, it aligns with the company's commitment to providing a dedicated crypto brokerage service with a focus on customer satisfaction and security.

The lack of live phone support

Invest Voyager, a cryptocurrency exchange, has been criticised for its lack of customer service. The company does not offer a phone support number or live chat, which has been a cause for concern for some users. While the company can be contacted via email, responses can take a long time, with some customers reporting that they have waited months for a reply. This has left some users feeling that the company is a scam and has even resulted in some people losing money.

However, it is worth noting that Invest Voyager is a rapidly growing company, and it is common for customer service to be a lower priority during periods of growth. As such, some users have urged others to be patient, recognising that the company is scaling up and that it takes time to build a strong customer service team. Indeed, there is some evidence that Invest Voyager's customer service is improving, with the company reportedly quadrupling its customer service staff in the last or current quarter. Additionally, the CEO of Invest Voyager has stated that improving customer service is a priority, and the company plans to introduce phone support, live chat, bots, and other features within six months.

Despite these assurances, the current lack of live phone support remains a concern for some potential users. This is particularly true for those considering investing large sums of money, who may feel that the lack of immediate support is a significant risk. For these individuals, the absence of live phone support could be a deal-breaker, potentially leading them to choose a different platform or broker.

While Invest Voyager's commitment to improving customer service is encouraging, the ongoing lack of live phone support may continue to deter some potential users. It is essential for the company to recognise the importance of this issue and take swift and effective action to address it. This may include hiring additional staff, improving training, and implementing new technologies to enhance the efficiency and effectiveness of their customer support. By prioritising these measures, Invest Voyager can work towards rebuilding trust and ensuring that its customers feel confident in their platform.

Frequently asked questions