Stephen Ehrlich, CEO of bankrupt cryptocurrency trade Voyager Digital, made millions of {dollars} promoting Voyager shares in February and March 2021 when shares had been near their peak, nineteen months earlier than the crypto lending agency declared chapter in July 2022, monetary data present.
Ehrlich’s good points had been propelled by the stratospheric enhance in Voyager’s stock price, which rocketed from seven cents a share in Oct. 2020 to $26 a share by March 2021. In the identical interval, Bitcoin rose 455% and Ether climbed 688%.
Like equally embattled Celsius, the agency promised mammoth returns on property that customers entrusted with them. But as crypto costs went into free fall earlier this 12 months, Voyager’s enterprise proved unsustainable, main the agency to freeze property that retail traders had deposited in June, then declare chapter in July. Voyager had custody of $1.3 billion in buyer crypto property unfold throughout 3.5 million lively customers, according to a bankruptcy filing.
A posh and opaque company construction – together with a reverse takeover of a defunct Canadian mining company, the acquisition and disposition of Delaware restricted legal responsibility corporations, and consulting charges paid out to insider LLCs – make it difficult to ascertain simply how a lot the Voyager co-founder took house.
What is obvious, primarily based on company insider disclosures and Voyager filings, is that Ehrlich made over $30 million disposing of Voyager fairness because the crypto lender’s shares neared an all-time excessive.
Ehrlich and his Delaware LLCs offered almost 1.9 million shares from February 9, 2021, to March 31, 2021, in 11 separate sales which totaled $31 million, based on knowledge from the Canadian Securities Administration.
The three largest of Ehrlich’s transactions – totaling 1.4 million shares price almost $19 million – had been related to a $50,000,000 secondary providing by Stifel Nicolaus in February 2021.
Voyager shares would peak at $29.86 per week after Ehrlich’s last sale on April 5, 2021. Three weeks later, VOYG shares had misplaced 41% of their worth. By November 2021 — because the crypto market general was peaking —Voyager was down 69% from its peak.
Many publicly traded corporations have restrictions or pre-determined buying and selling plans on when senior executives and insiders can execute sales. In the United States, these 10b5-1 plans stop insiders from utilizing “materials private info” to achieve a bonus or revenue. In Canada, these plans are often known as computerized securities disposition plans, or ADSPs.
On December 31, 2021, months after these insider sales, Voyager introduced the adoption of ADSPs for Ehrlich and one other govt, COO Gerard Hanshe. Less than a month later, on January 20, 2022, Ehrlich introduced the cancellation of the ADSPs earlier than any trades had been accomplished beneath them.
“Despite having a flooring considerably above the present stock price, I felt it was in one of the best curiosity of the traders to withdraw the plan,” Ehrlich mentioned in a press release. “Based on our key monetary metrics, together with revenues for the quarter ended December 31, 2021 as disclosed in our press launch issued January 5, 2022, I imagine Voyager is undervalued.”
Ehrlich didn’t reply to a number of requests for remark.
Voyager bumped into hassle earlier this 12 months as crypto costs dropped greater than 70% from their peak final fall. In specific, the collapse of a stablecoin, Terra, which was speculated to be pegged to the U.S. greenback, despatched shockwaves by means of the business.
Voyager disclosed to creditors on June 27 that hedge fund Three Arrows Capital had defaulted on a $650 million mortgage that Voyager had prolonged utilizing buyer property. At the time, Voyager insisted it will proceed to honor buyer withdrawals and redemptions.
Five days later, Ehrlich’s agency froze customer withdrawals, leaving millions of customers with out entry to their cryptoassets. “This was a tremendously tough resolution, however we imagine it’s the proper one given present market circumstances,” Ehrlich mentioned in an announcement.
On July 6, the crypto lender filed for Chapter 11 bankruptcy protection, partaking white-shoe agency Kirkland and Ellis and funding financial institution Moelis & Company to advise them by means of the method. Numerous petitioners have moved to regain entry to their holdings because the course of started.
The FDIC has since ordered Voyager to cease calling their merchandise FDIC-insured, calling the claims “false and deceptive.”