A New York judge has reluctantly allowed bankrupt crypto lender Voyager Digital Holdings to settle a $76,000 balance on its company credit cards but questioned why the company didn’t seek alternative sources of credit.
As reported by Law360, the troubled lender was told on Tuesday that it was okay to pay the pre-petition balances on 24 cards issued by San Francisco-based Brex Inc. The judge’s decision comes barely two weeks after Voyager filed for Chapter 11 protection.
At a virtual hearing, the company’s attorney argued that the cards are an essential part of its business operations due to it providing payments to vendors that only take credit card transactions.
Voyager also argued that it needed the cards to pay various state licensing and tax obligations.
However, despite these reasons, Judge Michael E. Wiles said he had “great misgivings” about approving Voyager’s motion.
The judge not only wanted to know why Voyager hadn’t considered other credit card accounts from providers not concerned with outstanding account balances but said he was unsure as to why Voyager needed cards at all.
“I’m concerned that we’re still at a point in the case where I’m only supposed to do things to prevent immediate and irreperable harm,” he said.
“Without you having even made an effort to secure new cards, all I have are vague and generalized descriptions of why you need credit cards generally, not why you need these particular cards or need to pay these amounts,” (our emphasis).
Voyager still owed $650 million by 3AC
However, Voyager’s legal team claimed that the company’s existing relationship with Brex meant that paying the balances and continuing to use the cards was quicker and easier than moving to a new provider and would cause the least amount of disruption to its business.
Voyager’s attorney also argued that it may be difficult to find a new provider due to the company’s bankruptcy and the uncertainty surrounding its future.
When granting the motion, Judge Wiles added: “I am tempted to say no just because the motion doesn’t come close to satisfying the standard in many respects.”
“In the future, I expect a more clear showing before I authorize something like this. In the absence of objections, I’ll approve this but with great misgivings,” (our emphasis).
Earlier this month, Voyager said that it was embarking on “a voluntary restructuring process” after Singapore-based crypto hedge fund Three Arrows Capital (3AC) collapsed owing the firm $650 million in bitcoin and USDC.
Voyager said that it was planning to restore access to all USD deposits on the platform but that the amount of crypto handed back to users would depend largely on how much it manages to recover from 3AC.