Stephen Ehrlich, CEO of bankrupt cryptocurrency exchange Voyager Digital, made millions of dollars selling Voyager shares in February and March 2021 when shares were near their peak, nineteen months before the crypto lending firm declared bankruptcy in July 2022, financial records show.
Ehrlich’s gains were propelled by the stratospheric increase in Voyager’s stock price, which rocketed from seven cents a share in Oct. 2020 to $26 a share by March 2021. In the same period, Bitcoin rose 455% and Ether climbed 688%.
Like similarly embattled Celsius, the firm promised mammoth returns on assets that users entrusted with them. But as crypto prices went into free fall earlier this year, Voyager’s business proved unsustainable, leading the firm to freeze assets that retail investors had deposited in June, then declare bankruptcy in July. Voyager had custody of $1.3 billion in customer crypto assets spread across 3.5 million active users, according to a bankruptcy filing.
A complex and opaque corporate structure – including a reverse takeover of a defunct Canadian mining corporation, the acquisition and disposition of Delaware limited liability companies, and consulting fees paid out to insider LLCs – make it challenging to establish just how much the Voyager co-founder took home.
What is evident, based on corporate insider disclosures and Voyager filings, is that Ehrlich made over $30 million disposing of Voyager equity as the crypto lender’s shares neared an all-time high.
Ehrlich and his Delaware LLCs sold nearly 1.9 million shares from February 9, 2021, to March 31, 2021, in 11 separate sales which totaled $31 million, according to data from the Canadian Securities Administration.
The three largest of Ehrlich’s transactions – totaling 1.4 million shares worth nearly $19 million – were connected to a $50,000,000 secondary offering by Stifel Nicolaus in February 2021.
Voyager shares would peak at $29.86 a week after Ehrlich’s final sale on April 5, 2021. Three weeks later, VOYG shares had lost 41% of their value. By November 2021 — as the crypto market overall was peaking —Voyager was down 69% from its peak.
Many publicly traded companies have restrictions or pre-determined trading plans on when senior executives and insiders can execute sales. In the United States, these 10b5-1 plans prevent insiders from using “material non-public information” to gain an advantage or profit. In Canada, these plans are known as automatic securities disposition plans, or ADSPs.
On December 31, 2021, months after these insider sales, Voyager announced the adoption of ADSPs for Ehrlich and another executive, COO Gerard Hanshe. Less than a month later, on January 20, 2022, Ehrlich announced the cancellation of the ADSPs before any trades were completed under 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 said in a press release. “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 did not respond to multiple requests for comment.
Voyager ran into trouble earlier this year as crypto prices dropped more than 70% from their peak last fall. In particular, the collapse of a stablecoin, Terra, which was supposed to be pegged to the U.S. dollar, sent shockwaves through the industry.
Voyager disclosed to creditors on June 27 that hedge fund Three Arrows Capital had defaulted on a $650 million loan that Voyager had extended using customer assets. At the time, Voyager insisted it would continue to honor customer withdrawals and redemptions.
Five days later, Ehrlich’s firm froze customer withdrawals, leaving millions of users without access to their cryptoassets. “This was a tremendously difficult decision, but we believe it is the right one given current market conditions,” Ehrlich said in a statement.
On July 6, the crypto lender filed for Chapter 11 bankruptcy protection, engaging white-shoe firm Kirkland and Ellis and investment bank Moelis & Company to advise them through the process. Numerous petitioners have moved to regain access to their holdings since the process began.
The FDIC has since ordered Voyager to cease calling their products FDIC-insured, calling the claims “false and misleading.”
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