According to a recent court filing, Voyager’s reward program, once the target of a regulator, has performed woefully since its inception. Based on the filings, the reward program lost over $13 million in its first three months of 2022, with the total year loss at $58 million.
Concerns Over The Significant Loss
Executives of the company have voiced their concerns over the massive loss Voyager incurred in providing users with high-yield products as part of its reward program, as revealed by the latest court filings. The chief commercial officer of Voyager, Evan Psaropoulos, stated that he is trying to talk to the CEO to reduce BTC by 4%.
In the filing, Evan reportedly revealed that the firm intends to have a rate on Bitcoin that will make Voyager open to other strategies beyond just lending. Alternatively, Evan noted that Voyager is also considering beefing up its team and lending its assets to borrowers with high-risk appetites.
According to the executives, the reward program’s high-cost marketing expense is necessary for user acquisition, as shown in the filing. In November 2021, the officials reportedly cited the reward and loyalty program as the instrument they leveraged to push the company’s users over the one million account mark.
However, the recent court document does not mention the reward program besides the high-yield accounts. It is worth noting that Voyager offered yields as high as 12% on specific digital assets.
On the cost of operating the program, Voyager adopted a lending system to fund it. Some of the counterparts in the lending program include Three Arrows Capital and other top crypto investment firms.
Last March, some US state regulators began investigating the company’s reward program, alleging that it is unregistered security. The director of the Alabama Securities Commission, Joseph Borg, explained that crypto interest accounts are subject to the same rules binding other interest-bearing investment tools.
Voyager Digital’s Implosion
At its peak, Voyager Digital boasted over 2 million users and $5.9 billion in assets as of July 2022. Most of the firm’s customers reportedly staked at least $10,000 in its platform, indicating a broad investor base.
Before its collapse, Voyager Digital was one of the leading crypto lending and trading platforms and one of the few listed on stock markets. Voyager’s fall began last year after it issued an unsecured loan to the now-collapsed Three Arrows Capital (3AC), which subsequently became defaulted.
On July 1, 2022, the company froze customer funds and filed for Chapter 11 bankruptcy protection in New York days later. Since then, Voyager had become bleak, with creditors pressuring the lending firm.
However, experts believe that Voyager’s collapse was not an isolated incident and was affected by the fallout of the Terra Luna ecosystem. Analysts noted that the crypto industry is heavily impacted by the dominos effect, where bankruptcy can have broad-reaching contagion on other businesses.
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