voyager digital

Crypto meltdown a boon for bankruptcy lawyers

Dec 2 (Reuters) – Turmoil in the cryptocurrency industry has rattled major exchanges and sent the value of digital assets tumbling, but at least one group stands to gain: bankruptcy lawyers.

High-profile bankruptcies involving crypto exchange FTX, hedge fund Three Arrows Capital and crypto lenders BlockFi, Celsius Network and Voyager Digital Ltd are generating new opportunities – and big fees – for law firms that counsel troubled companies.

Large law firms can rake in more than $100 million in legal fees during a long-running bankruptcy, experts said.

“You’ve got to pay the gravedigger,” said Adam Levitin, a law professor at Georgetown University who specializes in bankruptcy law. “These are complicated cases with a bunch of novel issues, and it shouldn’t be surprising that they are going to require a lot of attorney involvement.”

The value of bitcoin has dropped 65% so far this year, dragging down other crypto assets and leaving investors reeling. The spectacular implosion of FTX last month sent fresh shock waves through the cryptocurrency industry.

One U.S. law firm, Kirkland & Ellis, is representing BlockFi in its bankruptcy case filed on Monday and is also lead counsel for Celsius Network and Voyager Digital, which both filed

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FDIC Probes Voyager Digital Over FDIC Claims

Voyager Digital marketed its deposit accounts for crypto purchases as safe, but customers might not be afforded the protection they thought because their assets weren’t insured by the Federal Deposit Insurance Corporation (FDIC) in the way they thought, The Wall Street Journal reported Thursday (July 7).

The report noted that Voyager had marketed the accounts as protected by the FDIC. But that wasn’t entirely the case, and the FDIC is investigating, WSJ reported.

This comes as Voyager’s brokerage and lending services have been caught in a tangle of downward-spiraling crypto prices, and the company has filed for bankruptcy.

Voyager has frozen all activity, including withdrawals on $350 million in customer deposits stored at the New York-based Metropolitan Commercial Bank. Voyager said customers would be able to access those funds from the bank after the completion of a “reconciliation and fraud prevention process.”

There’s currently no timeline on when that will happen. But the report said that the funds are likely to be paid in full. This is not necessarily true for Voyager’s crypto assets.

Voyager advertised that deposits in Metropolitan Commercial Bank were insured by the FDIC. But the FDIC insures accounts only in the case of a failure of

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