Shares of Voyager Digital plummeted more than 60% Thursday after the cryptocurrency broker disclosed it could lose more than $650 million on a loan to the faltering hedge fund Three Arrows Capital.
The disclosures shed additional light on the magnitude of the harm caused by the crisis at Three Arrows, a Singaporean fund renowned for its aggressive long bets on cryptocurrencies.
This month, several crypto lenders, like BlockFi and Genesis, attempted to call in their loans to the fund.
Toronto-listed Three Arrows, a crypto hedge fund that failed to fulfill margin calls from multiple lenders this month, received a loan of $350 million worth of the stablecoin USDC coupled with 15,250 bitcoin from Voyager.
Voyager provides retail investors who deposit cryptocurrency with rewards, a debit card, and a mobile application for trading digital assets.In exchange, it guaranteed customers returns of up to 12%.
Since the collapse of the stablecoin Terra in May, Three Arrows has been impacted by the broader downturn in crypto markets, in which it had invested extensively. This month, another cryptocurrency lender, Celsius Network, froze withdrawals.
These liabilities included stablecoin USDC worth $840 million and bitcoin worth 33,000 units.
Stablecoins are a type of cryptocurrency tied to assets such as the US dollar that serve as a bridge between existing financial markets and the cryptocurrency world.
Voyager stated that it had urged Three Arrows to repay the loan by the beginning of the next week, but was "unable to estimate the amount it will be able to recover at this time."
In early trade, shares dropped 51%, valuing the company at barely C$152 million (US$117.5 million). Since its peak in November 2021, the company's stock has fallen by 95%.
The notice made no indication of whether Voyager had secured its loan to Three Arrows with collateral. It refused to explain.
Voyager stated earlier this month that it "distinguishes itself with a straightforward, low-risk approach to lending and asset management by working with a limited number of credible counterparties."
CEO Stephen Ehrlich stated at the time that Voyager was fully capitalized and well positioned to weather this market cycle and secure customer assets.
As of the beginning of this week, Voyager had only $152 million in cash and crypto assets, plus $20 million restricted for the purchase of USDC.
The lender announced on Wednesday that it has received a credit line from Alameda Research, the trading firm of crypto tycoon Sam Bankman-Fried, for $200 million in cash and $15,000 in bitcoin.