By Mark Ackman
Earlier this week, it was announced that leading crypto exchange FTX had won a $1.4 billion bid for the assets of bankrupt crypto firm Voyager Digital.
However, court filings have recently disclosed that the cash figure the crypto exchange is paying for the bankrupt company is significantly lower and it stands somewhere around $51 million.
The filings
The bulk of the offer that FTX made had been for the crypto holdings of Voyager Digital and these were close to $1.31 billion.
Court filings show that these holdings will be distributed to all those creditors who are eligible for it on a pro rata basis.
The founder of FTX exchange, Sam Bankman-Fried, has carried out an aggressive buying spree in the crypto space of late.
He has been busy snapping up highly discounted assets because the crypto industry has been dealing with numerous bankruptcies, defaults and general market tumult.
As far as the Voyager deal is concerned, the consideration that FTX will pay for non-crypto assets is around $111 million.
These include the intellectual property, the users as well as the structure of Voyager Digital itself. About $51 million of this figure is for the company’s user base, intellectual property and assets.
As far as the remaining $60 million is concerned, it is an account credit of $50 for every Voyager user who signs up with FTX and an ‘earn out’ allowance of $20 million.
Who benefits?
It is important to note that the filings did not immediately clarify who exactly would benefit from an earn out.
Acquisitions often use this as a way of giving incentives to management teams and founders of the company that is being bought.
The most recent bankruptcy report of Voyager Digital had disclosed that the crypto assets that the company held on behalf of its customers had been around $900 million.
Apart from that, the company had also loaned out around $456.44 million and it was also holding collateral on behalf of its borrowers worth $173.68 million.
The creditors
Voyager’s users who decide not to migrate to the FTX crypto exchange would get a pro rata distribution of the company’s assets.
This would depend on the portion they own of the overall holdings of Voyager. The troubles for the company emerged after it had issued a loan to Three Arrows Capital (3AC) worth $670 million.
The crypto hedge fund had defaulted early in the year and in late June, it also defaulted on its loan obligations.
This unleashed a financial storm that drove the founders of 3AC into hiding and pushed Voyager Digital into bankruptcy.
If creditors approve the bid from FTX, it would mean that all of Voyager’s loan balances, excluding the one from 3AC, would be transferred to FTX and by extension to its founder, Bankman-Fried.
The 3AC loan is not part of the deal. The price tag of $51 million would undoubtedly be a steep discount, given the assumption of the loan balances and customer assets.