Cryptocurrency has significantly risen in popularity in recent years, drawing millions of investors keen on tapping into the potential high returns. However, with the growth of the crypto market, concerns about safety and security have also emerged. One prominent player in the industry, Voyager Digital Ltd, has recently faced scrutiny and experienced financial difficulties. Many users often wonder: Is Voyager crypto safe?
In this article, we will delve into the details surrounding Voyager’s safety and provide you with the necessary information to make informed investment decisions.
Voyager Digital: A quick overview
In the dynamic world of cryptocurrency, Voyager Digital emerged in 2018 as a beacon for traders and investors. Spearheaded by CEO Stephen Ehrlich, this innovative platform positioned itself at the forefront of the crypto lending and trading landscape.
With connections to numerous prominent crypto exchanges and a vast array of digital currencies, it aimed to simplify the intricate world of crypto trading. However, the company’s future took a sharp turn when the crypto market experienced a severe downturn in 2022.
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A look back at Voyager – Image via Freepik
The rise and fall of Voyager
At its peak, Voyager boasted 3.5 million users and $5.9 billion in assets. However, the company faced numerous issues and eventually filed for bankruptcy in July 2022.
The bankruptcy filing by Voyager crypto raised major concerns among customers and left them wondering whether their assets were safe. Shortly before the filing, the company froze customer funds, preventing users from accessing their crypto holdings.
Voyager Digital was approved by U.S. Bankruptcy Judge Michael Wiles to proceed with a liquidation plan, which allowed the company to return over $1 billion in crypto assets to its customers.
Liquidation issues
One of the key factors that contributed to Voyager’s troubles was its extensive lending activities. As a crypto broker, Voyager facilitated loans to hedge funds and investment firms. This allowed them to make large trades and investments.
However, these loans proved to be risky, particularly when borrowers such as Three Arrows Capital defaulted on their obligations. This failure to manage counterparty risk and mitigate potential losses ultimately led to Voyager’s liquidity crisis.
Hopes of stabilizing the situation were initially high when a proposed asset sale to FTX, amounting to $1.42 billion, was on the horizon. However, these hopes were dashed following FTX’s unforeseen collapse. Subsequently, Binance extended a $1.3 billion lifeline. However, this, too, was withdrawn in April 2023, leaving Voyager in a precarious position.
Also Read:How to Start a Crypto Exchange in 9 Easy Steps (Tutorial)
Delving into the issues related to Voyager – Image via Freepik
Regulatory issues
In addition to its liquidity problems, Voyager also faced regulatory scrutiny. Both the Commodities and Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) filed parallel lawsuits against Voyager and its CEO, Ehrlich.
In a federal court complaint, the FTC alleged that Voyager, from at least 2018 to July 2022, lured consumers by assuring them their deposits were “safe.”
Voyager’s failure deprived consumers of significant savings, including regular salary deposits, college tuition funds, and home down payments. The complaint highlighted that consumers were unable to access their cash accounts for over a month and suffered a loss of over $1 billion in crypto assets. In October 2023, the FTC settled with Voyager, barring it from managing consumer assets.
The CFTC’s allegations include “reckless” lending by Ehrlich and Voyager to high-risk entities, with four of these companies later declaring bankruptcy. Voyager reportedly owes U.S. clients more than $1.7 billion. Ehrlich is further accused of violating derivatives regulations and failing to register a “commodity pool.” The CFTC has lodged its case in the U.S. District Court for the Southern District of New York.
Assessing Voyager’s security measures
When it comes to the safety of your crypto assets, it’s essential to understand the security measures implemented by the platform you choose. Voyager has not disclosed detailed information about its security practices. However, it’s important to note that the platform is regulated in the United States.
This regulatory oversight provides some level of assurance that Voyager is subject to certain standards and requirements regarding the protection of customer assets.
Unlike traditional banks, cryptocurrency platforms like Voyager are not covered by the Federal Deposit Insurance Corporation (FDIC). This typically means that if the platform goes bankrupt, customers may lose their digital assets. However, Voyager has claimed that up to $250,000 held in customers’ accounts was FDIC-insured through partner banks.
Lessons from Voyager’s story
Voyager’s fall from grace offers valuable lessons for cryptocurrency investors. Firstly, it underscores the necessity of comprehending the risks tied to crypto lending and trading platforms. These platforms are not as regulated as traditional banks and do not offer the same level of customer protection.
Secondly, it emphasizes the need for transparency from these platforms. Voyager’s downfall was partly due to its failure to adequately communicate its risk-taking behavior to its customers.
Also Read:How Can NFTs Be Used in DeFi (Decentralized Finance)?
The truth about Voyager crypto being safe – Image via Freepik
Verdict: Is Voyager crypto safe?
In conclusion, the incidents involving Voyager have significantly heightened concerns regarding the platform’s safety and reliability. The liquidity challenges, regulatory hurdles, and misleading assertions by the company have undermined trust in Voyager as a cryptocurrency exchange.
Although Voyager might have a roadmap for the future, it is prudent to exercise caution and explore other platforms with a demonstrated history of security and reliability. The protection of your crypto assets should take precedence, and selecting a reputable and dependable platform is a crucial step toward accomplishing this objective.
