Stephen Ehrlich, CEO of bankrupt cryptocurrency alternate Voyager Digital, made millions of {dollars} promoting Voyager shares in February and March 2021 when shares have been close to their peak, nineteen months earlier than the crypto lending agency declared chapter in July 2022, monetary data present.
Ehrlich’s features have been propelled by the stratospheric improve in Voyager’s stock worth, 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 belongings 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 belongings that retail buyers had deposited in June, then declare chapter in July. Voyager had custody of $1.3 billion in buyer crypto belongings unfold throughout 3.5 million lively customers, in keeping with a chapter submitting.
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 dwelling.
What is clear, based mostly 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 practically 1.9 million shares from February 9, 2021, to March 31, 2021, in 11 separate sales which totaled $31 million, in keeping with information from the Canadian Securities Administration.
The three largest of Ehrlich’s transactions – totaling 1.4 million shares value practically $19 million – have 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 closing sale on April 5, 2021. Three weeks later, VOYG shares had misplaced 41% of their worth. By November 2021 — because the crypto market total 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 “material non-public information” to realize a bonus or revenue. In Canada, these plans are often called 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 have been accomplished beneath them.
“Despite having a floor significantly above the current stock price, I felt it was in the best interest of the investors to withdraw the plan,” Ehrlich mentioned in a press launch. “Based on our key financial metrics, including revenues for the quarter ended December 31, 2021 as disclosed in our press release issued January 5, 2022, I believe Voyager is undervalued.”
Ehrlich didn’t reply to a number of requests for remark.
Voyager bumped into bother earlier this 12 months as crypto costs dropped greater than 70% from their peak final fall. In explicit, the collapse of a stablecoin, Terra, which was presupposed to be pegged to the U.S. greenback, despatched shockwaves via the trade.
Voyager disclosed to collectors on June 27 that hedge fund Three Arrows Capital had defaulted on a $650 million mortgage that Voyager had prolonged utilizing buyer belongings. At the time, Voyager insisted it might proceed to honor buyer withdrawals and redemptions.
Five days later, Ehrlich’s agency froze buyer withdrawals, leaving millions of customers with out entry to their cryptoassets. “This was a tremendously difficult decision, but we believe it is the right one given current market conditions,” Ehrlich mentioned in an announcement.
On July 6, the crypto lender filed for Chapter 11 chapter safety, participating white-shoe agency Kirkland and Ellis and funding financial institution Moelis & Company to advise them via the method. Numerous petitioners have moved to regain entry to their holdings for the reason that course of started.
The FDIC has since ordered Voyager to stop calling their merchandise FDIC-insured, calling the claims “false and misleading.”
