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July 25, 2022 – Sam Bankman-Fried (of Alameda Ventures Ltd. and FTX Trading Ltd., "Alameda" and FTX, respectively) has fired back in a Twitter thread at the Debtors' July 24th response [Docket No. 137] to a July 22nd FTX press release outlining an FTX offer for Voyager's assets.
Kirkland & Ellis ("Kirkland"), the Debtors' counsel, had drafted and/or reviewed the Voyager response calling it a "clear and intentional subversion of the bankruptcy process" and "nothing more than a liquidation of cryptocurrency on a basis that advantages AlamedaFTX. It’s a low-ball bid dressed up as a white knight rescue…"
Mr. Bankman-Fried took offense not merely at the characterization of his offer but also took multiple thinly veiled shots at Kirkland in a lengthy twitter thread clearly designed to weaken perception of Voyager's Plan by characterizing it as being driven by the greed of Voyager's professionals: "Well, the 'traditional' process is that before customers get their assets back, they get f-ed [we cleaned that up a bit]. First, there's a long, drawn out process, during which funds are frozen. It can take years. Remember Mt. Gox? That process is still going on….Meanwhile, that entire time, various bankruptcy agents are slowly bleeding the customer's frozen assets dry with consulting fees….meanwhile, Voyager's consultants would be slowly draining the remaining funds by charging fees every month the bankruptcy process dragged on….The consultants, for instance, likely want the bankruptcy process to drag out as long as possible maximizing their fees…. we think Voyager's customers should have the right to quickly claim their remaining assets if they want, without rent seeking in the middle….hopefully customers are allowed to choose it if they want…[and then finishing with the saracastic] If not guess it's up to the consultants to ensure prompt liquidity… "
So what now? Will Kirkland & Ellis engage in some sort of hybrid bankruptcy docket-Twitter war? Will Judge Michael E. Wiles try to bring some decorum to what is supposed to be section 363 auction/sale process run by his Court? The Debtor's bidding procedures hearing is not until August 4th and by then this process may have gone full Elon Musk.
For its part, Kirkland may be feeling the pressure as it tries to communicate in a hybrid communications world. In its first day hearing in respect of Voyager, they were clearly caught off balance by Judge Wiles insistent questioning on who owned the cryptocurrency deposited with Voyager. So much so, that by the time they were filing first day documentation in respect of their next Chapter 11 cypto client Celsius three weeks later, the highly emotive issue of cryptocurrency ownership was being given star billing by debtors being deluged by hate mail/filings because of the answer to that central ownership question (Each of Voyager and Celsius argue that ownership of cryptocurrency has been contactually ceded to them by depositors).
Now Kirkland is not only faced with a complete meltdown of the relationship between Alameda and client Voyager* (which has occured on their watch, having replaced Akin & Gump as Voyager counsel just before filing) but also stands to become the face of "agents bleeding" cryptocurrency depositors. As we note just below, Alameda and Voyager are not historically bitter rivals, quite the opposite, Alameda was very much a "white knight," in deed if not in motive. Bankman-Fried's focus may be deliberately on Kirkland to enable some semblance of diplomacy between Alameda/FTX and Voyager. It may also be that Kirkland is playing some sort of good cop/bad cop game with Alameda/FTX with Voyager management as the good cop.
*Alameda's ties to Voyager are considerable and the relationship complicated. On June 20th, well after Voyager (and Alameda) will have been aware that Voyager’s $650.0mn loan to 3AC was in deep trouble (Voyager declared a default in respect of the 3AC loan on June 27th), Alameda stepped in with a loan facility (the “Alameda Loan Facility”) comprised of $200.0mn of cash and USDC and 15,000 Bitcoin (ie just shy of the 15,250 Bitcoin that Voyager had leant to 3AC). Not only, according to Ehrlich, did Alameda provide Voyager “with capital to fund its business and cryptocurrency to facilitate trade execution if necessary,” Ehrlich stated on July 5th, the “Alameda Loan Facility also communicated to the market at large that Voyager had significant cash on hand and support from one of the industry’s key players.” As at that July 5th Petition date, Alameda was very much Voyager’s white knight.
On July 24th, the Debtors, who filed a bidding procedures motion on July 21st, responded emphatically to a press release issued by FTX, owner and operator of FTX.com (we cover the FTX press release separately.
Writing on behalf of the Debtors, Kirkland assail the FTX offer as both a "clear and intentional subversion of the bankruptcy process" and "nothing more than a liquidation of cryptocurrency on a basis that advantages AlamedaFTX. It’s a low-ball bid dressed up as a white knight rescue…."
In emotive language, the Debtors take aim at every element of the FTX proposal; insinuating that it may create tax liabilities for customers compelled to dollarize their coin, that their cash deposits (in respect of which Voyager is looking for a Court-authorized mecahnism to return) may be at risk and insisting that the "stand-alone Plan that Voyager filed is capable of delivering far more value to customers than the AlamedaFTX proposal—which transfers significant value to AlamedaFTX, and completely eliminates the value of assets that are of no interest to AlamedaFTX."
FTX's offer, the Debtors argue, is a forced liquidation of cryptocurrency…and only cryptocurrency (providing creditors with no value in respect of Voyager IP, the Voyager platform, Voyager's VGX token, or Voyagers' @$650.0mn claim against Three Arrows Capital); an offer made egregiously unfair by the fact that the coin is to be valued at July 5 (ie Petition date) prices. Leaving Bankman-Fried and Alameda with whatever upside exists in a recovering cryptocurrency market after what was an 80% collapse in respect of major cryptocurrencies [NB: Kirkland rejects FTX's contention that Voyager's Plan has capped customer claims at July 5th prices: "Voyager’s proposed stand-alone plan is clear that customer claims are not 'capped'.”].
In claims that are arguably both hypocritical and correct, the Debtors' note as to FTX's press release : "AlamedaFTX’s Proposal, which was made in contravention of the proposed Bidding Procedures, was designed to generate publicity for itself rather than value for Voyager’s customers….By making its Proposal publicly in a press release laden with misleading or outright false claims, AlamedaFTX violated many obligations to the Debtors and the Bankruptcy Court. Voyager reserves all rights and remedies against AlamedaFTX for its clear and intentional subversion of the bankruptcy process and the damages that may be suffered by customers and other creditors as a result."
The response also makes clear that speculation as to a "sweetheart transaction" between the Debtors and FTV/Alameda could not be "further from the truth:"… "many third parties have speculated that AlamedaFTX—because of its various relationships with Voyager, including as creditor, lender, and equity holder—had an 'inside track' to acquire Voyager on some type of sweetheart transaction terms. Nothing could be further from the truth as evidenced by this response. Voyager’s process will not be obstructed by anyone, including Alameda/FTX."
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