WEBVTT 00:00:00.000 --> 00:00:01.840 Welcome back to the Deep Dive. I hope you're 00:00:01.840 --> 00:00:03.319 sitting down for this one because we're about 00:00:03.319 --> 00:00:07.700 to unravel a story that feels less like a corporate 00:00:07.700 --> 00:00:10.859 case study and more like the script of a financial 00:00:10.859 --> 00:00:13.099 horror movie. It really does. It's got everything. 00:00:13.820 --> 00:00:15.800 Billions of dollars just evaporating overnight. 00:00:16.000 --> 00:00:18.519 A company that rises from nothing to the stock 00:00:18.519 --> 00:00:22.600 exchange and then back to nothing in record time. 00:00:22.699 --> 00:00:24.820 And a plot twist. You can't forget the plot twist. 00:00:24.960 --> 00:00:28.339 Oh, the plot twist involving a savior who turns 00:00:28.339 --> 00:00:30.350 out to be... Well, maybe the biggest villain 00:00:30.350 --> 00:00:32.929 of them all. It really is the definitive story 00:00:32.929 --> 00:00:36.350 of the 2022 crypto contagion. It's a domino effect 00:00:36.350 --> 00:00:39.409 in the purest, most destructive sense of the 00:00:39.409 --> 00:00:41.590 term. Yeah. We're talking about Voyager Digital. 00:00:41.929 --> 00:00:45.149 Voyager Digital. The name itself sounds so optimistic, 00:00:45.250 --> 00:00:46.689 doesn't it? Like, come with us, we're going to 00:00:46.689 --> 00:00:49.590 the moon. Right. It has that adventurous, exploratory 00:00:49.590 --> 00:00:52.270 feel. But as we were going to find out, the rocket 00:00:52.270 --> 00:00:56.420 didn't just fail to launch. It exploded on the 00:00:56.420 --> 00:00:59.179 pad and it took a lot of regular people's savings 00:00:59.179 --> 00:01:01.280 with it. And the speed of this story is what 00:01:01.280 --> 00:01:03.619 really stands out to me. We are looking at a 00:01:03.619 --> 00:01:07.200 timeline that is, it's just shockingly compressed. 00:01:07.319 --> 00:01:10.239 It's wild. This company was founded in 2018. 00:01:10.819 --> 00:01:16.040 By July 5, 2022, it was effectively dead, buried, 00:01:16.280 --> 00:01:19.719 liquidated. Four years. That's it. That's a high 00:01:19.719 --> 00:01:22.079 school education. That's one presidential term. 00:01:22.159 --> 00:01:25.879 Right. That is the entire lifespan of this multibillion 00:01:25.879 --> 00:01:28.819 dollar entity. Exactly. And our mission today 00:01:28.819 --> 00:01:31.340 is to slow that timeline down. We want to unpack 00:01:31.340 --> 00:01:33.859 specifically how this happened based on the available 00:01:33.859 --> 00:01:36.239 records. We aren't just looking at a standard 00:01:36.239 --> 00:01:38.359 bankruptcy here. We are looking at the total 00:01:38.359 --> 00:01:41.359 liquidation of a cryptocurrency hedge fund and 00:01:41.359 --> 00:01:43.459 brokerage that hundreds of thousands of people 00:01:43.459 --> 00:01:46.060 trusted. And before we get into the gears of 00:01:46.060 --> 00:01:47.939 the machine, we need to talk about where we are 00:01:47.939 --> 00:01:50.189 getting our in. The sources. Yeah. We're pulling 00:01:50.189 --> 00:01:52.329 the facts for this deep dive, primarily from 00:01:52.329 --> 00:01:54.489 the archives on Voyager Digital, specifically 00:01:54.489 --> 00:01:57.469 the Wikipedia records. But there's a really interesting 00:01:57.469 --> 00:01:59.650 note right at the top of that source file. I 00:01:59.650 --> 00:02:01.549 saw that, too. It's almost like a disclaimer. 00:02:01.890 --> 00:02:06.170 It is. It flags itself as being slanted towards 00:02:06.170 --> 00:02:09.120 recent events. Which is, I mean, that's a polite 00:02:09.120 --> 00:02:11.680 way of saying the history is written by the disaster. 00:02:12.000 --> 00:02:14.439 Right. It explicitly says it's missing information 00:02:14.439 --> 00:02:16.780 about the history of the company before 2022. 00:02:17.159 --> 00:02:19.199 Yeah. It's like we have a black box recorder 00:02:19.199 --> 00:02:21.500 from a plane crash. Right. But we only have the 00:02:21.500 --> 00:02:23.080 tape for the last 10 minutes when the engines 00:02:23.080 --> 00:02:25.340 were on fire. Exactly. We don't have the tape 00:02:25.340 --> 00:02:26.860 from when they were serving drinks at cruising 00:02:26.860 --> 00:02:29.419 altitude. That's a crucial point to keep in mind 00:02:29.419 --> 00:02:31.879 as we go through this. We are looking at the 00:02:31.879 --> 00:02:35.699 wreckage to understand the vehicle. History has 00:02:35.699 --> 00:02:38.120 a funny habit of only remembering the explosions 00:02:38.120 --> 00:02:42.000 not the construction. It's so true. Nobody writes 00:02:42.000 --> 00:02:44.960 down the boring Tuesday in 2019 when the compliance 00:02:44.960 --> 00:02:47.520 officer sent a memo. They only write down the 00:02:47.520 --> 00:02:50.620 day the doors were locked in 2022. So we have 00:02:50.620 --> 00:02:52.620 to play detective a little bit. We have to infer 00:02:52.620 --> 00:02:56.280 the scale of what was built based on how loud 00:02:56.280 --> 00:02:58.699 the crash was. Very good way to put it. And let 00:02:58.699 --> 00:03:01.240 me tell you this was a very loud crash. Incredibly 00:03:01.240 --> 00:03:03.430 loud. So if you're listening to this and you 00:03:03.430 --> 00:03:05.610 maybe heard the noise about the crypto crash 00:03:05.610 --> 00:03:09.009 of 2022, you know, you saw the headlines, maybe 00:03:09.009 --> 00:03:11.189 you had a friend who was stressing out, or maybe 00:03:11.189 --> 00:03:13.210 you lost money yourself. Which a lot of people 00:03:13.210 --> 00:03:15.430 did. A lot of people. But you never really understood 00:03:15.430 --> 00:03:19.169 the mechanics of it. This is for you. We are 00:03:19.169 --> 00:03:21.229 going to go step by step through the collapse 00:03:21.229 --> 00:03:23.889 of this specific giant. Let's get into it. Okay, 00:03:23.930 --> 00:03:28.150 so part one, the entity. To understand the crash, 00:03:28.430 --> 00:03:30.250 we have to understand the machine that crashed. 00:03:30.389 --> 00:03:33.770 What exactly was Voyager Digital? It's a great 00:03:33.770 --> 00:03:36.250 question. Because names in the crypto space can 00:03:36.250 --> 00:03:39.009 be a little ambiguous. You have protocols, you 00:03:39.009 --> 00:03:42.490 have DAOs, you have exchanges. Was this just 00:03:42.490 --> 00:03:45.189 an app? Was it a bank? It was definitely not 00:03:45.189 --> 00:03:47.370 a bank. And we are going to get to why that distinction 00:03:47.370 --> 00:03:51.569 is absolutely critical. legally dangerous later 00:03:51.569 --> 00:03:54.650 on. Okay. But structurally, Voyager Digital was 00:03:54.650 --> 00:03:56.810 a cryptocurrency brokerage. Brokerage. Okay. 00:03:56.849 --> 00:03:59.409 So like an E -Trade or Charles Schwab, but for 00:03:59.409 --> 00:04:01.979 Bitcoin? That was the pitch. Yes. That's how 00:04:01.979 --> 00:04:04.439 it looked to the consumer. But it was also operating 00:04:04.439 --> 00:04:06.560 as a hedge fund, which is where things get really 00:04:06.560 --> 00:04:09.300 murky. How so? What's the difference? Well, a 00:04:09.300 --> 00:04:12.099 brokerage just executes trades for you. You say 00:04:12.099 --> 00:04:15.400 buy, they buy. A hedge fund takes pooled money 00:04:15.400 --> 00:04:18.079 and makes bets to earn a return. And Voyager 00:04:18.079 --> 00:04:20.199 was doing both. They were effectively doing both 00:04:20.199 --> 00:04:23.120 under one roof. It was founded in 2018. And here 00:04:23.120 --> 00:04:26.519 is detail that really matters. Its headquarters 00:04:26.519 --> 00:04:30.060 were in New York. New York City. That stands 00:04:30.060 --> 00:04:32.420 out to me immediately. It should. A lot of these 00:04:32.420 --> 00:04:35.019 crypto projects are headquartered in, you know, 00:04:35.019 --> 00:04:38.100 the Bahamas or the Cayman Islands or some decentralized 00:04:38.100 --> 00:04:41.180 cloud land where the regulators can't find them. 00:04:41.370 --> 00:04:43.670 Right. Some jurisdiction of convenience. But 00:04:43.670 --> 00:04:46.230 New York implies a certain level of, I don't 00:04:46.230 --> 00:04:48.189 know, traditional corporate structure. It does. 00:04:48.449 --> 00:04:51.670 It signals an attempt at legitimacy. It signals 00:04:51.670 --> 00:04:54.269 proximity to Wall Street, to traditional finance, 00:04:54.430 --> 00:04:57.009 to the real money. Right. If you are a retail 00:04:57.009 --> 00:04:59.470 investor, just a normal person wanting to buy 00:04:59.470 --> 00:05:02.310 some Ethereum, and you see an app based in New 00:05:02.310 --> 00:05:04.490 York City, you automatically assume there are 00:05:04.490 --> 00:05:06.370 adults in the room. You assume there is oversight. 00:05:07.019 --> 00:05:09.220 Right. You think if they're in New York, the 00:05:09.220 --> 00:05:10.980 aggressive regulators there must have signed 00:05:10.980 --> 00:05:13.399 off on this. It just feels safer, doesn't it? 00:05:13.459 --> 00:05:15.740 It absolutely does. It feels safer than sending 00:05:15.740 --> 00:05:18.360 your money to an anonymous exchange based in 00:05:18.360 --> 00:05:20.800 a tax haven. And they leaned into that image, 00:05:21.000 --> 00:05:23.040 right? Yeah. The image of legitimacy. Oh, heavily. 00:05:23.519 --> 00:05:25.540 if you look at their public status it wasn't 00:05:25.540 --> 00:05:28.339 just a startup the source material mentions that 00:05:28.339 --> 00:05:30.800 voyager digital began trading on the toronto 00:05:30.800 --> 00:05:34.199 stock exchange the tsx that's a major board it 00:05:34.199 --> 00:05:37.180 is a very serious exchange and we have records 00:05:37.180 --> 00:05:39.980 of a nasdaq u article regarding that listing 00:05:39.980 --> 00:05:42.480 so think about the picture being painted here 00:05:42.480 --> 00:05:45.800 in late 2021 yeah this isn't some shady website 00:05:45.800 --> 00:05:49.000 this is a publicly traded company on a major 00:05:49.000 --> 00:05:51.620 north american stock exchange i could buy shares 00:05:51.620 --> 00:05:54.060 of voyager in your retirement account. Exactly. 00:05:54.060 --> 00:05:56.879 At the same time, use the Voyager app to buy 00:05:56.879 --> 00:05:58.959 crypto. The lines were intentionally blurred. 00:05:59.180 --> 00:06:01.879 That was September 2021. They are ringing the 00:06:01.879 --> 00:06:04.899 opening bell. Metaphorically speaking, the stock 00:06:04.899 --> 00:06:07.579 is trading. Yep. The crypto market is booming. 00:06:07.839 --> 00:06:11.060 Bitcoin is heading toward, what, $69 ,000? The 00:06:11.060 --> 00:06:13.199 absolute peak. It must have felt like they were 00:06:13.199 --> 00:06:16.199 printing money. It likely did. And that public 00:06:16.199 --> 00:06:18.439 listing, it acts as a shield. It makes people 00:06:18.439 --> 00:06:21.139 stop asking questions. How so? Well, the thinking 00:06:21.139 --> 00:06:23.560 goes, they're public, so they must be audited. 00:06:23.620 --> 00:06:25.339 They must be solvent. They have to file reports. 00:06:25.600 --> 00:06:28.420 It just creates a false sense of security. So 00:06:28.420 --> 00:06:30.319 they had this consumer -facing platform. The 00:06:30.319 --> 00:06:34.540 website was investvoyager .com. Invest Voyager. 00:06:34.560 --> 00:06:37.600 Invest Voyager. It sounds so adventurous. Like 00:06:37.600 --> 00:06:40.939 your Captain Kirk boldly going where no portfolio 00:06:40.939 --> 00:06:43.319 has gone before. It certainly turned out to be 00:06:43.319 --> 00:06:45.379 an adventure, though I think most customers would 00:06:45.379 --> 00:06:47.500 have preferred a boring savings account in hindsight. 00:06:47.860 --> 00:06:50.879 No kidding. So we have this established entity, 00:06:51.060 --> 00:06:54.139 New York based, publicly traded, operating for 00:06:54.139 --> 00:06:57.110 about three or four years. They are onboarding 00:06:57.110 --> 00:06:59.769 grandmas and college students alike. That was 00:06:59.769 --> 00:07:02.149 the target market, really. Mass retail. Then 00:07:02.149 --> 00:07:04.569 we hit the catalyst. The moment the music stopped, 00:07:04.810 --> 00:07:08.589 we need to talk about June 2022. This is where 00:07:08.589 --> 00:07:11.670 the first domino falls. And it falls hard. The 00:07:11.670 --> 00:07:13.730 records show Voyager made a stunning announcement. 00:07:14.310 --> 00:07:16.990 They stated that Three Arrows Capital had not 00:07:16.990 --> 00:07:19.110 repaid their loans. Now, for those who don't 00:07:19.110 --> 00:07:21.970 know, Three Arrows Capital, everyone called them 00:07:21.970 --> 00:07:25.569 3AC, was a massive hedge fund in the space. They 00:07:25.569 --> 00:07:27.649 were the cool kids of crypto. They were seen 00:07:27.649 --> 00:07:31.170 as the smart money, or so everyone thought, the 00:07:31.170 --> 00:07:34.110 geniuses in the room. But let's look at the number, 00:07:34.170 --> 00:07:36.110 because this is the part that makes my jaw drop 00:07:36.110 --> 00:07:39.370 every time I read it. The debt that 3AC owed 00:07:39.370 --> 00:07:43.730 to Voyager. It is a staggering figure, $666 million. 00:07:44.110 --> 00:07:47.029 I mean, come on. You cannot write this stuff. 00:07:47.250 --> 00:07:49.730 No. If you put that in a movie script, the producer 00:07:49.730 --> 00:07:52.589 would tell you it's too on the nose. The loan 00:07:52.589 --> 00:07:56.189 that kills the company. is exactly $666 million. 00:07:56.569 --> 00:07:59.329 It is an ominous number, certainly. But let's 00:07:59.329 --> 00:08:01.069 strip away the superstition for a second and 00:08:01.069 --> 00:08:02.870 just look at the finance of it. Okay. From a 00:08:02.870 --> 00:08:05.110 risk management perspective, that number is a 00:08:05.110 --> 00:08:07.550 catastrophe. It's a complete failure. Let's unpack 00:08:07.550 --> 00:08:11.029 that. Voyager is a brokerage. I, the customer, 00:08:11.170 --> 00:08:14.449 put my US dollars or my Bitcoin into Voyager. 00:08:14.550 --> 00:08:16.449 I see it on my screen. I think it's sitting there 00:08:16.449 --> 00:08:18.149 in a vault. Right. You think it's your property. 00:08:18.370 --> 00:08:21.209 But Voyager clearly was taking that money and 00:08:21.209 --> 00:08:23.850 lending it out to generate yield. Correct. That's 00:08:23.850 --> 00:08:25.550 the hedge fund part of the business. And they 00:08:25.550 --> 00:08:27.910 lent over half a billion dollars to one entity. 00:08:28.149 --> 00:08:30.949 That appears to be the case. And this is the 00:08:30.949 --> 00:08:34.070 danger of the hedge fund model masquerading as 00:08:34.070 --> 00:08:37.710 a brokerage. Explain that. In a traditional brokerage, 00:08:37.710 --> 00:08:41.009 if you buy a stock, the broker holds the stock 00:08:41.009 --> 00:08:44.090 for you. They don't lend it out to a gambler 00:08:44.090 --> 00:08:47.250 in Vegas without your permission. But in crypto, 00:08:47.470 --> 00:08:49.870 specifically with these yield bearing accounts, 00:08:50.129 --> 00:08:52.730 that is exactly what was happening. Your assets 00:08:52.730 --> 00:08:55.990 were being rehypothecated. And was this collateralized? 00:08:56.009 --> 00:08:59.049 Like if I borrow money for a house, the bank 00:08:59.049 --> 00:09:01.370 holds the D. If I don't pay, they take the house. 00:09:01.730 --> 00:09:06.230 Did 3AC give Voyager $666 million worth of collateral? 00:09:06.490 --> 00:09:09.070 The records suggest it was largely unsecured. 00:09:09.149 --> 00:09:11.340 Unsecured. Or at the very least. significantly 00:09:11.340 --> 00:09:13.740 under -collateralized, which, when the market 00:09:13.740 --> 00:09:15.980 crashes, becomes the same thing as unsecured. 00:09:16.120 --> 00:09:18.580 That's like me lending a stranger $50 ,000 on 00:09:18.580 --> 00:09:20.539 a handshake because he has a nice suit. It's 00:09:20.539 --> 00:09:22.419 worse. It's like lending your neighbor's $50 00:09:22.419 --> 00:09:25.019 ,000 to a stranger on a handshake. Right, because 00:09:25.019 --> 00:09:27.460 this wasn't Voyager's money. This was customer 00:09:27.460 --> 00:09:30.440 money. Precisely. The money they were playing 00:09:30.440 --> 00:09:32.600 with belonged to hundreds of thousands of individual 00:09:32.600 --> 00:09:34.860 people. That is terrifying. Why would they do 00:09:34.860 --> 00:09:37.820 that? Why would a New York based publicly traded 00:09:37.820 --> 00:09:41.159 company take a risk that massive on one borrower? 00:09:41.320 --> 00:09:43.379 You have to look at the environment of 2021. 00:09:43.779 --> 00:09:46.500 This was the super cycle. Everyone believed crypto 00:09:46.500 --> 00:09:49.960 only went up. 3AC was viewed as invincible and 00:09:49.960 --> 00:09:53.019 Voyager needed to generate yield. They were likely 00:09:53.019 --> 00:09:57.090 promising customers what? 5%, 8%, 9 % interest 00:09:57.090 --> 00:09:59.090 on their deposits. Yeah, the marketing was aggressive. 00:09:59.269 --> 00:10:03.590 Earn 9 % APR on your USDC. I saw those ads everywhere. 00:10:03.830 --> 00:10:07.230 Exactly. In a world where a bank pays you 0 .01%, 00:10:07.230 --> 00:10:10.450 how do you pay 9 %? You have to take risks. You 00:10:10.450 --> 00:10:11.889 have to take that money and lend it to someone 00:10:11.889 --> 00:10:14.610 who is willing to pay you 10 % or 12%. And the 00:10:14.610 --> 00:10:16.549 only people willing to pay those rates are high 00:10:16.549 --> 00:10:19.009 -risk hedge funds making massive leveraged bets. 00:10:19.389 --> 00:10:21.850 So it's a greed loop. It's a greed loop. To keep 00:10:21.850 --> 00:10:23.730 the customers happy with high yields, Voyager 00:10:23.730 --> 00:10:26.139 had to... take higher and higher risks. And 3AC 00:10:26.139 --> 00:10:28.200 was the highest risk, highest return player in 00:10:28.200 --> 00:10:30.580 the game. And they put all their eggs or at least 00:10:30.580 --> 00:10:33.620 a massive, massive basket of eggs into the 3AC 00:10:33.620 --> 00:10:36.899 basket. Seemingly, yeah. The concentration risk 00:10:36.899 --> 00:10:40.759 was off the charts. So in June 2022, when the 00:10:40.759 --> 00:10:43.419 market turns and 3AC blows up, Voyager comes 00:10:43.419 --> 00:10:45.679 out and says, hey, remember that hedge fund? 00:10:45.799 --> 00:10:49.460 Yeah. They owe us $666 million and they ghosted 00:10:49.460 --> 00:10:51.870 us. That has to be the moment the alarm bells 00:10:51.870 --> 00:10:54.490 started ringing in every boardroom in the industry. 00:10:54.750 --> 00:10:57.659 Why? Because if a borrower defaults on that size 00:10:57.659 --> 00:11:00.019 of a loan, the lender Voyager doesn't have the 00:11:00.019 --> 00:11:02.320 liquidity to pay their own customers if they 00:11:02.320 --> 00:11:04.740 want to withdraw their money. It creates a liquidity 00:11:04.740 --> 00:11:07.120 crisis instantly. It's a bank run waiting to 00:11:07.120 --> 00:11:09.279 happen. Absolutely. If I hear that news, the 00:11:09.279 --> 00:11:11.600 first thing I do is open the app and hit withdraw. 00:11:11.840 --> 00:11:14.220 And if everyone does that at once and the money 00:11:14.220 --> 00:11:16.559 isn't there because it vanished with 3AC. The 00:11:16.559 --> 00:11:18.559 game is over. The game is over. And that leads 00:11:18.559 --> 00:11:21.039 us right into the nightmare scenario for the 00:11:21.039 --> 00:11:23.309 users. Right. Part three. The week of collapse 00:11:23.309 --> 00:11:27.129 is July 2022. Yeah. And looking at the dates 00:11:27.129 --> 00:11:29.570 and the records, it happened so fast. It wasn't 00:11:29.570 --> 00:11:32.429 a slow bleed. It was a guillotine. It was incredibly 00:11:32.429 --> 00:11:35.250 rapid. The default announcement regarding 3AC 00:11:35.250 --> 00:11:39.190 was late June. Then we get to July 1st. July 00:11:39.190 --> 00:11:44.190 1st. The freeze. The source says Voyager suspended 00:11:44.190 --> 00:11:48.779 three things. Trading, deposits. and withdrawals 00:11:48.779 --> 00:11:52.039 which is the trifecta of game over for a financial 00:11:52.039 --> 00:11:54.360 platform you can't put money in you can't move 00:11:54.360 --> 00:11:56.419 money around and you can't take money out it's 00:11:56.419 --> 00:11:58.590 a trap Your money is officially trapped. They 00:11:58.590 --> 00:12:01.570 also suspended loyalty rewards. Yes, that detail 00:12:01.570 --> 00:12:04.350 always sticks out to me. It seems so trivial 00:12:04.350 --> 00:12:07.250 compared to the billions lost, but it speaks 00:12:07.250 --> 00:12:09.590 to the psychology of the whole scheme. It's just 00:12:09.590 --> 00:12:11.850 adding insult to injury, isn't it? Talk to me 00:12:11.850 --> 00:12:13.970 about these loyalty rewards. What was the point 00:12:13.970 --> 00:12:16.210 of them? It was gamification. It was a way to 00:12:16.210 --> 00:12:19.169 lock you in. They had their own token, VGX. Ah, 00:12:19.350 --> 00:12:22.149 the platform token. Exactly. And they created 00:12:22.149 --> 00:12:24.769 tiers. Hold more Voyager token and we'll give 00:12:24.769 --> 00:12:27.500 you a boost on your interest rate. or get more 00:12:27.500 --> 00:12:29.960 rewards. So it incentivized people to not only 00:12:29.960 --> 00:12:32.159 keep their money on the platform, but to buy 00:12:32.159 --> 00:12:34.860 the company's own, you know, made up currency. 00:12:35.379 --> 00:12:37.539 Precisely. It locked people in emotionally and 00:12:37.539 --> 00:12:39.220 financially. It made them feel like they were 00:12:39.220 --> 00:12:41.799 part of a club getting a special deal. So imagine 00:12:41.799 --> 00:12:44.720 being a user. It's Friday morning, July 1st. 00:12:44.720 --> 00:12:47.039 You check your app. You have your Bitcoin, your 00:12:47.039 --> 00:12:50.139 Ethereum, and you have these loyalty points racking 00:12:50.139 --> 00:12:52.139 up because you're a navigator or what are they 00:12:52.139 --> 00:12:54.220 called? The top tier. Yeah, some cool sounding 00:12:54.220 --> 00:12:57.269 name. You feel smart. you feel wealthy and suddenly 00:12:57.269 --> 00:13:01.309 boom the screen says trading suspended it is 00:13:01.309 --> 00:13:03.409 the digital equivalent of showing up to your 00:13:03.409 --> 00:13:05.429 bank branch and finding the windows boarded up 00:13:05.429 --> 00:13:07.549 and a padlock on the door oh that's a good analogy 00:13:07.549 --> 00:13:10.750 the panic that sets in at that moment is indescribable 00:13:10.750 --> 00:13:13.070 you realize those numbers on the screen might 00:13:13.070 --> 00:13:16.169 just be pixels not property And the speed from 00:13:16.169 --> 00:13:18.470 that suspension to the formal legal filing was 00:13:18.470 --> 00:13:21.450 practically a blink of an eye. It was. They didn't 00:13:21.450 --> 00:13:24.370 even try to limp along for months. No. July 5th, 00:13:24.370 --> 00:13:28.169 2022, just four days after the freeze. Over a 00:13:28.169 --> 00:13:30.789 holiday weekend, no less. Wow. Voyager files 00:13:30.789 --> 00:13:33.710 for Chapter 11 bankruptcy protection. Now, you're 00:13:33.710 --> 00:13:36.009 the expert here. We hear Chapter 11 a lot in 00:13:36.009 --> 00:13:38.809 corporate news. It usually means reorganization, 00:13:38.889 --> 00:13:41.590 right? Right. Like, we made a mistake. Give us 00:13:41.590 --> 00:13:43.429 a minute to restructure our debt and we'll be 00:13:43.429 --> 00:13:45.769 back in business. Airlines do it all the time. 00:13:45.950 --> 00:13:48.809 Theoretically, yes. Chapter 11 is designed to 00:13:48.809 --> 00:13:50.950 allow a company to pause its debts, negotiate 00:13:50.950 --> 00:13:54.259 with creditors, and continue operations. It's 00:13:54.259 --> 00:13:57.179 distinct from Chapter 7, which is immediate liquidation 00:13:57.179 --> 00:13:59.620 selling everything for scrap. So why did that 00:13:59.620 --> 00:14:02.500 work here? In the crypto world, Chapter 11 is 00:14:02.500 --> 00:14:05.340 often a waiting room for death. Why is that? 00:14:05.419 --> 00:14:07.659 Why couldn't they just reorganize? Because their 00:14:07.659 --> 00:14:10.799 core business was trust. An airline can file 00:14:10.799 --> 00:14:12.840 Chapter 11 and you'll still fly with them because 00:14:12.840 --> 00:14:15.320 you know the plane will still take off. You trust 00:14:15.320 --> 00:14:18.659 Boeing or Airbus, not necessarily the airline's 00:14:18.659 --> 00:14:21.840 accountants, but a bank. or a crypto brokerage. 00:14:22.080 --> 00:14:24.379 Once you lock the doors and tell people we lost 00:14:24.379 --> 00:14:27.740 your money, the trust is vaporized. Nobody is 00:14:27.740 --> 00:14:29.720 ever going to deposit a single dollar with you 00:14:29.720 --> 00:14:32.860 again, ever. So even though they filed for protection, 00:14:33.179 --> 00:14:35.850 they were a zombie company walking. Exactly. 00:14:35.850 --> 00:14:38.210 And looking at the header of our source material, 00:14:38.509 --> 00:14:41.210 the ultimate fate of the company is listed as 00:14:41.210 --> 00:14:43.929 liquidation. There was no coming back from a 00:14:43.929 --> 00:14:47.809 $666 million hole when your reputation is destroyed. 00:14:48.029 --> 00:14:50.029 But the bankruptcy filing was just the beginning 00:14:50.029 --> 00:14:52.830 of the bad news for the customers. Because once 00:14:52.830 --> 00:14:55.809 the regulators, who had been suspiciously quiet 00:14:55.809 --> 00:14:58.590 during the boom years, started looking under 00:14:58.590 --> 00:15:00.649 the hood. Yeah, once they finally woke up. They 00:15:00.649 --> 00:15:03.049 found something arguably worse than just bad 00:15:03.049 --> 00:15:05.789 debts. They found lies. This is the part that 00:15:05.789 --> 00:15:08.529 turns this from a story of, you know, incompetence 00:15:08.529 --> 00:15:10.690 into a story of deception. We're talking about 00:15:10.690 --> 00:15:15.429 the regulatory hammer. Late July 2022. Yes. We 00:15:15.429 --> 00:15:17.590 see intervention from two heavy hitters, the 00:15:17.590 --> 00:15:21.610 Federal Reserve and the FDIC. The FDIC? The Federal 00:15:21.610 --> 00:15:24.370 Deposit Insurance Corporation. For our listeners 00:15:24.370 --> 00:15:26.929 who aren't finance nerds, explain why seeing 00:15:26.929 --> 00:15:29.549 the FDIC involved here is such a big deal. The 00:15:29.549 --> 00:15:32.370 FDIC is the bedrock of American banking. It's 00:15:32.370 --> 00:15:34.389 the reason you don't panic when you hear a bank 00:15:34.389 --> 00:15:36.669 is struggling. They guarantee that if a bank 00:15:36.669 --> 00:15:39.210 fails, the government will pay you back up to 00:15:39.210 --> 00:15:43.289 $250 ,000. It is the gold standard of safety. 00:15:43.470 --> 00:15:46.750 It's what separates a real bank from, well, a 00:15:46.750 --> 00:15:49.340 crypto app. And Voyager had been using that name, 00:15:49.399 --> 00:15:51.980 hadn't they? They had. And the regulators were 00:15:51.980 --> 00:15:54.360 not happy about it. They sent a joint letter 00:15:54.360 --> 00:15:57.299 ordering Voyager to cease and desist. Doing what? 00:15:57.399 --> 00:15:59.320 From making false and misleading statements. 00:15:59.940 --> 00:16:02.100 Specifically, statements about U .S. banking 00:16:02.100 --> 00:16:04.159 insurance. Okay, let's pause on this because 00:16:04.159 --> 00:16:06.879 this is huge. It is. This changes the narrative 00:16:06.879 --> 00:16:10.039 completely. It goes from Voyager made a bad business 00:16:10.039 --> 00:16:14.080 bet on 3AC to Voyager was lying to its customers. 00:16:15.039 --> 00:16:17.419 What exactly were they telling people? The implication 00:16:17.419 --> 00:16:19.480 from the records is that Voyager used language 00:16:19.480 --> 00:16:21.820 suggesting that customer funds held on the platform 00:16:21.820 --> 00:16:25.440 were FDIC insured. So my Bitcoin was FDIC insured? 00:16:25.539 --> 00:16:27.759 No, but they made it seem like the cash you held 00:16:27.759 --> 00:16:30.220 there was, they would say things like, your USD 00:16:30.220 --> 00:16:33.299 is safe or Voyager is FDIC insured. But were 00:16:33.299 --> 00:16:36.700 they? No. And here is the nuance. It's a very 00:16:36.700 --> 00:16:40.039 clever, very deceptive trick. Voyager had a partner 00:16:40.039 --> 00:16:42.720 bank, Metropolitan Commercial Bank, that was 00:16:42.720 --> 00:16:46.179 FDIC insured. Okay. When you sent dollars to 00:16:46.179 --> 00:16:48.980 Voyager, they put those dollars in an omnibus 00:16:48.980 --> 00:16:52.059 account at that bank. That specific account was 00:16:52.059 --> 00:16:54.820 insured if the bank failed. Okay, so if Metropolitan 00:16:54.820 --> 00:16:57.659 Commercial Bank went under, the money was safe. 00:16:57.799 --> 00:16:59.980 Correct. But what if Voyager went under? That 00:16:59.980 --> 00:17:03.379 insurance did not apply if Voyager failed. which 00:17:03.379 --> 00:17:06.079 is exactly what happened. The FDIC insurance 00:17:06.079 --> 00:17:09.539 provided zero protection to the end user. But 00:17:09.539 --> 00:17:12.940 Voyager's marketing blurred that line intentionally. 00:17:13.819 --> 00:17:16.900 They used the FDIC logo. They made customers 00:17:16.900 --> 00:17:19.180 feel like the government was backing their crypto 00:17:19.180 --> 00:17:21.599 app. That is incredibly manipulative. You have 00:17:21.599 --> 00:17:23.539 customers who might have been skeptical of crypto, 00:17:23.579 --> 00:17:25.319 but they thought, well, even if this company 00:17:25.319 --> 00:17:27.579 is sketchy, my cash is insured like it is at 00:17:27.579 --> 00:17:30.480 Chase or Wells Fargo. The website says FDIC. 00:17:30.740 --> 00:17:32.519 And that's exactly the person they were preying 00:17:32.519 --> 00:17:34.240 on, the person looking for that little bit of 00:17:34.240 --> 00:17:36.039 reassurance. And then the Fed comes out and says, 00:17:36.180 --> 00:17:39.759 no, that is false. Stop saying that. It is a 00:17:39.759 --> 00:17:42.839 massive betrayal of trust. It explains why people 00:17:42.839 --> 00:17:44.680 might have kept their life savings on the platform 00:17:44.680 --> 00:17:47.500 even as rumors started swirling. They thought 00:17:47.500 --> 00:17:49.920 they had a safety net that simply did not exist. 00:17:50.279 --> 00:17:52.339 It's like buying a car because it has an airbag 00:17:52.339 --> 00:17:55.039 crashing and finding out the airbag was just 00:17:55.039 --> 00:17:57.539 a painted balloon. That is a perfect and tragic 00:17:57.539 --> 00:18:01.619 analogy. Yeah. So now we are in late July. The 00:18:01.619 --> 00:18:04.240 company is bankrupt. The regulators are yelling 00:18:04.240 --> 00:18:07.859 fraud or at least misleading practices. The customers 00:18:07.859 --> 00:18:10.170 are locked out. Is there any good news? Was there 00:18:10.170 --> 00:18:12.569 any relief at all? Well, there is a glimmer, 00:18:12.670 --> 00:18:16.470 a faint glimmer. This brings us to August 2022. 00:18:16.950 --> 00:18:19.269 Okay, what happened in August? The records mention 00:18:19.269 --> 00:18:21.890 a court order. A judge approved returning cash 00:18:21.890 --> 00:18:24.470 to customers. Cash, okay. Yes, the amount approved 00:18:24.470 --> 00:18:30.190 was $270 million. $270 million. On the surface, 00:18:30.269 --> 00:18:31.529 that sounds like a lot of money. If you tell 00:18:31.529 --> 00:18:34.569 me I'm getting a share of $270 million, I'm feeling 00:18:34.569 --> 00:18:37.609 okay. It is a large sum in isolation. However... 00:18:37.849 --> 00:18:41.089 Context is everything. The records explicitly 00:18:41.089 --> 00:18:43.970 state that this money accounted for only a small 00:18:43.970 --> 00:18:46.809 portion of total investor funds. A small portion. 00:18:46.970 --> 00:18:50.089 So if you had $10 ,000 on Voyager, maybe you 00:18:50.089 --> 00:18:53.029 got, what, a few hundred bucks back? It depends 00:18:53.029 --> 00:18:55.450 on how you held it. This highlights a critical 00:18:55.450 --> 00:18:56.970 distinction we need to make for the listener. 00:18:57.069 --> 00:19:00.730 The difference between cash... and crypto assets 00:19:00.730 --> 00:19:03.589 in a bankruptcy, they are treated completely 00:19:03.589 --> 00:19:05.869 differently. Right. Break that down for us. The 00:19:05.869 --> 00:19:09.309 $270 million was likely the U .S. dollars sitting 00:19:09.309 --> 00:19:10.990 in that pass -through account we talked about, 00:19:11.069 --> 00:19:12.849 the one at Metropolitan Commercial Bank. Okay. 00:19:13.069 --> 00:19:15.750 Because it was just cash sitting in a bank, the 00:19:15.750 --> 00:19:18.490 judge ruled it belonged to the customers. It 00:19:18.490 --> 00:19:20.609 wasn't really Voyager's property, so they could 00:19:20.609 --> 00:19:23.210 give it back. So if I had sold my Bitcoin on 00:19:23.210 --> 00:19:26.230 June 30th and just had cash sitting in the app, 00:19:26.349 --> 00:19:28.190 I might have gotten lucky and gotten all my cash 00:19:28.190 --> 00:19:32.190 back. Potentially. But if you had Bitcoin or 00:19:32.190 --> 00:19:36.210 Ethereum or USDC or that Voyager token, that 00:19:36.210 --> 00:19:39.569 is not cash. That is an asset. And in the eyes 00:19:39.569 --> 00:19:42.309 of the bankruptcy court, when you deposited that 00:19:42.309 --> 00:19:45.269 crypto into Voyager, you effectively gave them 00:19:45.269 --> 00:19:47.960 ownership of it in exchange for an IOU. You gave 00:19:47.960 --> 00:19:49.740 them a loan. You gave them an unsecured loan. 00:19:49.779 --> 00:19:52.220 You became an unsecured creditor. So that crypto 00:19:52.220 --> 00:19:54.720 wasn't mine anymore. It belonged to the company. 00:19:54.940 --> 00:19:57.400 It became part of the bankruptcy estate. It was 00:19:57.400 --> 00:19:59.960 trapped. It was theirs to lose, basically. So 00:19:59.960 --> 00:20:02.720 the relief was basically just giving people back 00:20:02.720 --> 00:20:05.599 the change they left on the counter while the 00:20:05.599 --> 00:20:07.759 store kept the expensive merchandise they bought. 00:20:07.960 --> 00:20:11.660 That is a cynical but likely accurate assessment. 00:20:12.019 --> 00:20:14.740 And the vast majority of the value people thought 00:20:14.740 --> 00:20:17.579 they had, the billions of dollars, was in those 00:20:17.579 --> 00:20:19.900 crypto assets, which were now locked in a legal 00:20:19.900 --> 00:20:22.779 battle. OK, so the company is dead. The customers 00:20:22.779 --> 00:20:25.539 got pennies on the dollar or at least the cash 00:20:25.539 --> 00:20:27.880 customers got their cash and the crypto customers 00:20:27.880 --> 00:20:30.460 got nothing yet. Nothing yet. Now we have a dead 00:20:30.460 --> 00:20:32.519 carcass of a company. What happens to it? We 00:20:32.519 --> 00:20:35.140 enter the auction phase. The liquidation process 00:20:35.140 --> 00:20:37.420 usually involves selling off whatever assets 00:20:37.420 --> 00:20:40.150 are left. the customer list, the technology, 00:20:40.369 --> 00:20:43.049 and of course, the remaining crypto to the highest 00:20:43.049 --> 00:20:46.009 bidder to pay back the creditors. And this brings 00:20:46.009 --> 00:20:48.009 us to, I think, the most dramatic part of the 00:20:48.009 --> 00:20:52.309 story, the bidding war. It's incredible. Honestly, 00:20:52.430 --> 00:20:54.670 looking at this timeline, it plays out like a 00:20:54.670 --> 00:20:57.750 comedy of errors or maybe a tragedy of errors. 00:20:57.869 --> 00:20:59.970 It really does. It's almost Shakespearean in 00:20:59.970 --> 00:21:04.230 its absurdity. We are in September 2022 now. 00:21:04.750 --> 00:21:07.430 Two months after the bankruptcy filing. The customers 00:21:07.430 --> 00:21:09.849 are desperate. They just want someone, anyone, 00:21:09.990 --> 00:21:12.069 to buy the company so they can get their crypto 00:21:12.069 --> 00:21:14.640 back. Who steps into the ring? We have two titans 00:21:14.640 --> 00:21:16.599 of the industry at the time. The two biggest 00:21:16.599 --> 00:21:19.599 names in the world, Binance and FTX. Binance 00:21:19.599 --> 00:21:22.039 and FTX. It's like Godzilla and Kong fighting 00:21:22.039 --> 00:21:24.720 over a ruined city. It really was. The two giants. 00:21:24.920 --> 00:21:27.559 What were the bids? The records note that both 00:21:27.559 --> 00:21:30.779 made bids of nearly $50 million. $50 million. 00:21:31.039 --> 00:21:33.940 Okay, wait. We're talking about a $666 million 00:21:33.940 --> 00:21:36.720 hole. We're talking about billions in assets. 00:21:37.400 --> 00:21:40.319 Why is the bid only $50 million? That seems... 00:21:40.670 --> 00:21:43.690 tiny it does but it's a bit misleading that 50 00:21:43.690 --> 00:21:46.269 million dollars is likely just the premier that 00:21:46.269 --> 00:21:48.069 cash payment to the company for the right to 00:21:48.069 --> 00:21:50.089 take over oh okay the winner would also have 00:21:50.089 --> 00:21:51.970 to agree to pay back the customers using the 00:21:51.970 --> 00:21:53.970 remaining assets on the platform so the 50 million 00:21:53.970 --> 00:21:56.210 dollars was just the entry fee essentially the 00:21:56.210 --> 00:21:58.349 real cost was making the customers whole or as 00:21:58.349 --> 00:22:00.269 whole as possible got it that makes more sense 00:22:00.269 --> 00:22:04.309 so who won godzilla or kong The winner was FTX. 00:22:04.509 --> 00:22:07.210 Reference number eight confirms it. FTX wins 00:22:07.210 --> 00:22:10.589 auction for bankrupt crypto broker Voyager Digital's 00:22:10.589 --> 00:22:17.069 assets. FTX wins. Sam Bankman -Fried. SBF. The 00:22:17.069 --> 00:22:19.049 man with the afro who is on the cover of Forbes. 00:22:19.210 --> 00:22:22.240 He comes in to save the day. The white knight 00:22:22.240 --> 00:22:24.339 of crypto. That was a narrative in September 00:22:24.339 --> 00:22:27.519 2022. Absolutely. He was bailing out BlockFi. 00:22:27.640 --> 00:22:29.740 He was bailing out Voyager. He was positioning 00:22:29.740 --> 00:22:32.619 himself as the JP Morgan of crypto, the lender 00:22:32.619 --> 00:22:34.819 of last resort. The customers must have felt 00:22:34.819 --> 00:22:38.019 a huge wave of relief. OK, FTX is huge. They 00:22:38.019 --> 00:22:39.799 have Super Bowl commercials. Tom Brady likes 00:22:39.799 --> 00:22:41.920 them. My money is finally safe. I'm going to 00:22:41.920 --> 00:22:44.799 be made whole. There was a lot of optimism. A 00:22:44.799 --> 00:22:47.299 transition plan was put in place. Customers were 00:22:47.299 --> 00:22:49.660 told to prepare to move their accounts to FTX. 00:22:49.740 --> 00:22:53.119 The end was in sight. And then November happened. 00:22:53.299 --> 00:22:55.839 Yes. The plot twist to end all plot twists. November 00:22:55.839 --> 00:22:59.640 2022. FTX files for bankruptcy. You cannot make 00:22:59.640 --> 00:23:01.839 this up. It's unbelievable. A company that won 00:23:01.839 --> 00:23:04.140 the auction to bail out Voyager. The company 00:23:04.140 --> 00:23:05.819 that was supposed to be the safe pair of hands. 00:23:06.519 --> 00:23:08.539 goes bankrupt in a fraud scandal even bigger 00:23:08.539 --> 00:23:10.980 than voyagers talk about bad luck i mean from 00:23:10.980 --> 00:23:12.619 the customer's perspective it's just a cosmic 00:23:12.619 --> 00:23:15.119 joke or maybe just bad due diligence i mean the 00:23:15.119 --> 00:23:18.079 whole industry was a house of cards but yes voyager 00:23:18.079 --> 00:23:20.400 is sitting there thinking they are saved and 00:23:20.400 --> 00:23:23.599 their savior literally drops dead of a heart 00:23:23.599 --> 00:23:25.779 attack right in front of them so what happened 00:23:25.779 --> 00:23:28.660 to the deal The deal was voided instantly. It 00:23:28.660 --> 00:23:31.119 put the entire bailout in jeopardy. And for the 00:23:31.119 --> 00:23:33.799 customers, this must have been excruciating. 00:23:33.900 --> 00:23:36.720 It's emotional whiplash. You go from, I lost 00:23:36.720 --> 00:23:39.240 everything in July, to I'm getting it back in 00:23:39.240 --> 00:23:42.619 September, to, oh God, the Savior is a fraud 00:23:42.619 --> 00:23:46.089 too in November. It's a nightmare. And the financial 00:23:46.089 --> 00:23:49.029 impact was massive. The records mention a major 00:23:49.029 --> 00:23:51.509 investor stated that the FTX meltdown threatened 00:23:51.509 --> 00:23:56.269 $1 .3 billion of investor assets. Wait, $1 .3 00:23:56.269 --> 00:23:58.309 billion? Where did that number come from? That 00:23:58.309 --> 00:24:01.309 likely represents the total market value at the 00:24:01.309 --> 00:24:03.450 time of the crypto assets that Voyager still 00:24:03.450 --> 00:24:05.690 held. The pot of money that was supposed to be 00:24:05.690 --> 00:24:07.509 distributed. So that's the customer's money. 00:24:07.670 --> 00:24:10.390 That's the customer's money. The idea was that 00:24:10.390 --> 00:24:12.809 FTX would take those assets and distribute them. 00:24:13.130 --> 00:24:17.049 When FTX collapsed, that $1 .3 billion was suddenly 00:24:17.049 --> 00:24:19.670 in limbo again and at risk of getting dragged 00:24:19.670 --> 00:24:22.589 into the FTX bankruptcy mess. That is a massive 00:24:22.589 --> 00:24:24.869 number. We were talking about the $270 million 00:24:24.869 --> 00:24:28.390 in cash returned earlier. The gap between $270 00:24:28.390 --> 00:24:32.329 million and $1 .3 billion. That is the pain gap 00:24:32.329 --> 00:24:34.450 for the customer. That is the money that is stuck. 00:24:34.750 --> 00:24:37.609 Exactly. And now Voyager is back to square one. 00:24:37.769 --> 00:24:40.130 Worse than square one because now the whole industry 00:24:40.130 --> 00:24:43.559 is radioactive. So FTX is out. The carcass is 00:24:43.559 --> 00:24:46.759 back on the market. Who is left? Who would even 00:24:46.759 --> 00:24:49.059 want to touch this now? Round two. We move to 00:24:49.059 --> 00:24:51.880 December 2022. Okay. And the other bidder comes 00:24:51.880 --> 00:24:54.339 back to the table. Binance. They lost the first 00:24:54.339 --> 00:24:55.940 time, but now the winner is dead, so they step 00:24:55.940 --> 00:24:59.440 up. Specifically, Binance .us, the American subsidiary, 00:24:59.539 --> 00:25:01.839 they win the new bid. And what is the price tag 00:25:01.839 --> 00:25:04.160 this time? The records say approximately $1 billion. 00:25:04.740 --> 00:25:06.880 Now, we need to clarify this number because it 00:25:06.880 --> 00:25:09.220 sounds huge compared to the $50 million we heard 00:25:09.220 --> 00:25:11.819 earlier. Yeah, it does. This $1 billion figure 00:25:11.819 --> 00:25:14.160 likely refers to the valuation of the assets 00:25:14.160 --> 00:25:17.819 Binance. U .S. agreed to take on and distribute. 00:25:18.160 --> 00:25:20.079 It doesn't mean they wrote a check for $1 billion 00:25:20.079 --> 00:25:23.160 to the Voyager executives. It means they agreed 00:25:23.160 --> 00:25:26.339 to manage the $1 billion pot of remaining crypto 00:25:26.339 --> 00:25:28.839 and get it back to the users. Okay, that makes 00:25:28.839 --> 00:25:31.799 sense. So a $1 billion deal is on the table. 00:25:32.019 --> 00:25:34.440 Binance .us is going to take over. Customers 00:25:34.440 --> 00:25:37.539 are thinking, okay, third time's the charm. Binance 00:25:37.539 --> 00:25:39.960 is the biggest exchange in the world. Sure. this 00:25:39.960 --> 00:25:42.220 will work. You would think so. You would think 00:25:42.220 --> 00:25:44.619 the pain is finally over. I feel a butt coming. 00:25:45.180 --> 00:25:47.460 Remember the regulatory theme we touched on earlier? 00:25:47.920 --> 00:25:51.299 The government was waking up and they were angry. 00:25:51.539 --> 00:25:54.440 Oh no, don't tell me. January 2023, the final 00:25:54.440 --> 00:25:57.039 hurdle. The SEC. The U .S. Securities and Exchange 00:25:57.039 --> 00:25:59.599 Commission files a limited objection to the acquisition. 00:25:59.960 --> 00:26:02.470 Why? Why would they stop a deal that would help 00:26:02.470 --> 00:26:04.690 customers get their money back? The customers 00:26:04.690 --> 00:26:07.450 are bleeding out and the SEC says, stop the ambulance. 00:26:07.769 --> 00:26:10.269 It's a complicated legal argument, but essentially 00:26:10.269 --> 00:26:13.930 the SEC was worried about the legality of how 00:26:13.930 --> 00:26:17.410 Binance .US operated. They question whether their 00:26:17.410 --> 00:26:20.309 plan for redistributing the assets constituted 00:26:20.309 --> 00:26:22.769 the sale of unregistered securities. So they 00:26:22.769 --> 00:26:25.589 were protecting the consumers by preventing the 00:26:25.589 --> 00:26:27.890 consumers from getting their money. That is the 00:26:27.890 --> 00:26:31.430 paradox of regulation in a crisis. The regulators 00:26:31.430 --> 00:26:34.190 want to ensure the law is followed, but enforcing 00:26:34.190 --> 00:26:37.089 the law strictly often means freezing the assets 00:26:37.089 --> 00:26:39.500 indefinitely. So they didn't trust Binance. They 00:26:39.500 --> 00:26:42.279 did not. And after the FTX debacle, where the 00:26:42.279 --> 00:26:44.359 regulators looked completely asleep at the wheel, 00:26:44.579 --> 00:26:46.420 they weren't going to rubber stamp anything. 00:26:46.660 --> 00:26:49.119 They were going to object to everything. It's 00:26:49.119 --> 00:26:51.220 just hurdle after hurdle. You survive the fraud. 00:26:51.400 --> 00:26:53.640 You survive the bankruptcy. You survive the fake 00:26:53.640 --> 00:26:56.019 savior. And then the government steps in and 00:26:56.019 --> 00:26:58.680 blocks the real savior. It creates a state of 00:26:58.680 --> 00:27:00.900 permanent limbo for the users. And that brings 00:27:00.900 --> 00:27:02.859 us to the end of the timeline provided in our 00:27:02.859 --> 00:27:05.420 records. We end on a cliffhanger, essentially. 00:27:05.660 --> 00:27:09.079 January 2023, the SEC is objecting. And the final 00:27:09.079 --> 00:27:11.480 fate listed in the source header is liquidation. 00:27:11.579 --> 00:27:14.160 Which means, in the end, nobody really bought 00:27:14.160 --> 00:27:16.259 it. They just had to sell it all off for parts. 00:27:16.559 --> 00:27:18.660 It seems that way. The rescue missions failed. 00:27:19.200 --> 00:27:21.220 Let's zoom out. I want to look at the big picture 00:27:21.220 --> 00:27:23.519 here. Because when you stack all these events 00:27:23.519 --> 00:27:26.400 up, the timeline is breathless. It's just one 00:27:26.400 --> 00:27:28.559 catastrophe after another. It is. Let's just 00:27:28.559 --> 00:27:30.079 run through it one more time to feel the weight 00:27:30.079 --> 00:27:35.220 of it. 2018. Founded. A New York dream. September 00:27:35.220 --> 00:27:38.680 2021. Top of the world. Listed on the Toronto 00:27:38.680 --> 00:27:42.299 Stock Exchange. Peak bull run. June 2022. The 00:27:42.299 --> 00:27:46.559 $666 million hole with 3AC. The betrayal. The 00:27:46.559 --> 00:27:49.539 beginning of the era. July 2022. Bankruptcy and 00:27:49.539 --> 00:27:52.740 the FDIC fraud warning. The lockdown. Yep. August 00:27:52.740 --> 00:27:55.119 2022. Customers get a tiny bit of cash back. 00:27:55.339 --> 00:27:58.160 270 meters. But the crypto is stuck. A sliver 00:27:58.160 --> 00:28:01.329 of hope. September 2022. FTX wins the bid. Hope 00:28:01.329 --> 00:28:05.150 returns. The false star. November 2022, FTX dies. 00:28:05.509 --> 00:28:09.170 Hope dies. Utter chaos. December 2022, Binance 00:28:09.170 --> 00:28:11.609 .us wins the bid. Another chance. January 2023, 00:28:12.049 --> 00:28:14.369 the SEC objects. And the whole thing grinds to 00:28:14.369 --> 00:28:16.750 a halt again. It is a relentless cascade of failure. 00:28:16.849 --> 00:28:19.029 Every single failsafe that is supposed to exist 00:28:19.029 --> 00:28:20.849 in a financial market failed. How do you mean? 00:28:21.089 --> 00:28:23.390 Due diligence failed. They lent half a billion 00:28:23.390 --> 00:28:26.319 dollars to a single entity. Diversification failed. 00:28:26.700 --> 00:28:29.660 Insurance fail. Or rather, the claims about it 00:28:29.660 --> 00:28:32.380 were false. Bankruptcy protection failed to make 00:28:32.380 --> 00:28:34.740 people whole. Even the rescue acquisitions failed. 00:28:34.859 --> 00:28:37.319 It's a total system failure. And what strikes 00:28:37.319 --> 00:28:39.380 me, going back to the very beginning of our conversation, 00:28:39.640 --> 00:28:42.539 is that information gap we talked about. The 00:28:42.539 --> 00:28:44.559 missing years. The missing years. The years that 00:28:44.559 --> 00:28:47.779 the source flags as missing info. Right. We have 00:28:47.779 --> 00:28:50.079 this high -definition, day -by -day account of 00:28:50.079 --> 00:28:53.309 the death of Voyager. But the life of Voyager, 00:28:53.430 --> 00:28:57.789 the years 2018, 2019, 2020, is a black box in 00:28:57.789 --> 00:29:00.490 this source. It is fascinating to speculate on 00:29:00.490 --> 00:29:02.390 what was happening in that black box because 00:29:02.390 --> 00:29:05.230 we can sort of deduce it from the crash scene. 00:29:05.470 --> 00:29:09.970 How so? You don't get to a $666 million unsecured 00:29:09.970 --> 00:29:12.910 loan to a single borrower overnight. That level 00:29:12.910 --> 00:29:15.390 of risk appetite is learned. It's a culture. 00:29:15.789 --> 00:29:17.990 It suggests that during those missing years, 00:29:18.170 --> 00:29:20.130 they were likely taking bigger and bigger risks 00:29:20.130 --> 00:29:22.140 and getting away with it. because the market 00:29:22.140 --> 00:29:25.160 was going up. It's the survivor bias. They probably 00:29:25.160 --> 00:29:28.200 made risky loans in 2020 that paid off handsomely. 00:29:28.279 --> 00:29:31.380 They made risky loans in 2021 that paid off even 00:29:31.380 --> 00:29:34.079 more. Of course. So they thought they were geniuses. 00:29:34.099 --> 00:29:36.880 Exactly. We're invincible. We're New York's finest. 00:29:37.619 --> 00:29:40.200 They likely mistook a bull market for skill. 00:29:40.500 --> 00:29:44.160 They mistook luck for genius. So when 3AC came 00:29:44.160 --> 00:29:46.920 knocking for half a billion dollars, they didn't 00:29:46.920 --> 00:29:50.400 see a risk. They saw another easy win. They saw 00:29:50.400 --> 00:29:52.920 the biggest score yet. It's like driving a car 00:29:52.920 --> 00:29:55.019 at 100 miles per hour. As long as the road is 00:29:55.019 --> 00:29:57.599 straight, you feel like a great driver. You feel 00:29:57.599 --> 00:29:59.779 totally in control. Yeah, you feel like a professional. 00:30:00.059 --> 00:30:02.000 You only realize you're going too fast when the 00:30:02.000 --> 00:30:04.839 curve comes. And June 2022 was a hairpin turn 00:30:04.839 --> 00:30:07.839 for the entire market. So bringing this all together 00:30:07.839 --> 00:30:10.380 for our listener, why does this story matter? 00:30:11.180 --> 00:30:14.039 Aside from the... you know morbid curiosity of 00:30:14.039 --> 00:30:16.319 watching a billion dollars burn voyager digital 00:30:16.319 --> 00:30:18.579 is the perfect case study because it exposes 00:30:18.579 --> 00:30:21.079 the lie of safe crypto what do you mean by that 00:30:21.400 --> 00:30:24.460 Voyager wasn't marketed to the degens or the 00:30:24.460 --> 00:30:26.640 hardcore traders. It was marketed to regular 00:30:26.640 --> 00:30:28.859 people, your uncle, your neighbor. It was the 00:30:28.859 --> 00:30:32.740 safe, publicly traded, insured option. It was 00:30:32.740 --> 00:30:34.900 supposed to be the on -ramp for the average person. 00:30:35.079 --> 00:30:37.740 Exactly. And it turned out to be just as dangerous 00:30:37.740 --> 00:30:40.180 as the wildest casino in the Bahamas. Perhaps 00:30:40.180 --> 00:30:42.799 more dangerous. Why is that? Because people lowered 00:30:42.799 --> 00:30:45.640 their guard. If you go to a casino, you know 00:30:45.640 --> 00:30:48.839 you might lose. With Voyager... You thought you 00:30:48.839 --> 00:30:51.460 were investing. That is a very, very good point. 00:30:51.619 --> 00:30:54.680 And I think the key takeaway for me is the interplay 00:30:54.680 --> 00:30:57.359 between cash and assets that we discussed. The 00:30:57.359 --> 00:31:01.380 $270 million versus the $1 .3 billion. It highlights 00:31:01.380 --> 00:31:03.319 a fundamental truth that I think everyone needs 00:31:03.319 --> 00:31:05.640 to understand. Even now, money in a bank account 00:31:05.640 --> 00:31:08.859 is property. It's yours. Right. Crypto assets 00:31:08.859 --> 00:31:11.460 held on a brokerage platform are often just an 00:31:11.460 --> 00:31:13.619 unsecured loan to the company. It's the difference 00:31:13.619 --> 00:31:15.480 between having cash in your wallet and having 00:31:15.480 --> 00:31:17.670 a betting slip in your pocket. That's it. One 00:31:17.670 --> 00:31:20.549 is money. The other is a claim on potential value. 00:31:20.930 --> 00:31:23.309 Precisely. And when the house goes bust, the 00:31:23.309 --> 00:31:25.630 betting slip is just a piece of paper. That is 00:31:25.630 --> 00:31:28.890 a sobering thought. And it raises a final provocative 00:31:28.890 --> 00:31:30.730 question about the regulators, doesn't it? It 00:31:30.730 --> 00:31:33.329 does. We saw the SEC object to the Binance deal. 00:31:33.630 --> 00:31:35.730 The regulators stepped in to stop the rescue. 00:31:36.230 --> 00:31:39.430 The question is, if the regulators intervene 00:31:39.430 --> 00:31:42.549 to stop the recovery of assets because of compliance. 00:31:43.599 --> 00:31:45.940 Who are they actually protecting? Right. Are 00:31:45.940 --> 00:31:48.140 they protecting the consumer from future harm 00:31:48.140 --> 00:31:51.059 by making sure Binance follows the rules? Or 00:31:51.059 --> 00:31:52.980 are they just ensuring that the consumer stays 00:31:52.980 --> 00:31:56.859 at zero by blocking the only viable path to recovery? 00:31:57.119 --> 00:31:59.180 When a company like this fails, who actually 00:31:59.180 --> 00:32:02.180 owns the wreckage? Is it the creditors? The new 00:32:02.180 --> 00:32:04.700 buyer? Or is it the government regulators who 00:32:04.700 --> 00:32:06.829 get to decide who is allowed to buy it? And while 00:32:06.829 --> 00:32:08.849 they fight over that question in courtrooms for 00:32:08.849 --> 00:32:11.269 years, the customer is the one waiting outside 00:32:11.269 --> 00:32:13.470 the locked doors. Still checking their app, seeing 00:32:13.470 --> 00:32:15.710 maintenance mode, and knowing their loyalty rewards 00:32:15.710 --> 00:32:18.210 are gone forever. Well, on that cheerful note, 00:32:18.349 --> 00:32:21.029 seriously, though, thank you for unpacking this 00:32:21.029 --> 00:32:24.089 with me. It is a dense, painful story, but I 00:32:24.089 --> 00:32:26.170 think understanding Voyager really helps you 00:32:26.170 --> 00:32:28.890 understand the whole 2022 crisis. It really does. 00:32:29.369 --> 00:32:32.049 It wasn't just bad luck. It was bad structure. 00:32:32.190 --> 00:32:34.690 It was a failure from top to bottom. It was a 00:32:34.690 --> 00:32:37.369 house of cards built on a foundation of trust 00:32:37.369 --> 00:32:40.170 me, bro. And when the wind blew, it all came 00:32:40.170 --> 00:32:42.809 down. And thanks to all of you for listening. 00:32:43.069 --> 00:32:45.549 Hopefully your assets are safe and sound and 00:32:45.549 --> 00:32:48.349 you've checked your custody agreements. Thanks 00:32:48.349 --> 00:32:50.190 for taking the deep dive with us. Until next 00:32:50.190 --> 00:32:50.450 time.