Voyager May Have Been Hacked in Bankruptcy Process as Customers Recovered Money

Steven Church, Bloomberg News

The Voyager Digital website on a smartphone in the Brooklyn borough of New York, US, on Friday, July 8, 2022. Crypto broker Voyager Digital Ltd. filed for Chapter 11 bankruptcy protection just weeks after getting a lifeline from billionaire Sam Bankman-Fried’s Alameda Research, citing market volatility and the collapse of a hedge fund it had lent money to. , Bloomberg

(Bloomberg) -- Voyager Digital Holdings Inc. may have been hacked just as it reopened its crypto platform so that customers could recover their money as part of a court-supervised liquidation process, a lawyer for the bankrupt firm said.

Voyager reopened its platform for 30 days to allow customers to retrieve any remaining assets, after months of court-supervised fundraising efforts to repay customers and other creditors. During that window, customers were able to withdraw about $490 million worth of assets, or nearly 80% of what was available, lawyer Darren Azman told the judge overseeing the Chapter 11 case in Manhattan.

The possible breach has been reported to law enforcement agencies and is being investigated by the bankruptcy officials overseeing the company’s wind down, Azman said during the brief court hearing.

Customers have been hit with various scams designed to gain access to their digital wallets, according to Azman. Typically, the scammers set up a fake website that claims Voyager customers can increase their payout by linking their non-Voyager crypto wallets to a new account. Once the new account is created, the non-Voyager wallets are drained, said Azman.

Very few customers have fallen for any of the scams, but there have been some victims, he added.

“It’s disgraceful,” US Bankruptcy Judge Michael Wiles said during the court hearing, which was held by telephone. “I don’t know what to say. After everything these folks have been through.”

Voyager is the first of a string of bankrupt crypto firms to begin returning money to creditors and customers.

In April, Binance.US terminated a deal to purchase the crypto platform, reducing what customers could recover. At the time, Voyager officials estimated that customers could get back about 36% of what they were owed, or more than 60% if the company won a court fight with another bankrupt crypto firm, FTX Trading. Voyager only had about $630 million to satisfy $1.8 billion in account claims, according to court documents.

Voyager was founded in 2018 and grew rapidly, reaching a peak of 3.5 million users and some $6 billion worth of cryptocurrency assets, court records show.

The bankruptcy is Voyager Digital Holdings Inc., 22-10943, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).