Major crypto exchange Voyager Digital halted all trading, deposits and withdrawals, preventing all users from accessing their funds after losing over half of its assets from Three Arrows Capital's (3AC) default on a loan worth over US$650 million.
Voyager Digital is a crypto firm that functioned similarly to a bank through which users could deposit dollars or crypto to earn up to 12% interest.
However, the exchange, whose stock price had declined over 90% year-to-date, received another blow as 3AC failed to repay its $650 million loan.
After halting withdrawals, Voyager said in a press release that it is searching for ways to solve liquidity issues.
"This was a tremendously difficult decision, but we believe it is the right one given current market conditions. This decision gives us additional time to continue exploring strategic alternatives with various interested parties," said Stephen Ehrlich, chief executive of Voyager.
Though Voyager said that it was insured by the Federal Deposit Insurance Corporation (FDIC) in the case that the exchange were to fall through, multiple users have called the FDIC and reported that customers of Voyager exchange did not receive protection.
The entire crypto sector has been unstable as many prominent players have collapsed. Voyager's situation mirrors what happened to Celsius, another crypto lender, last month, which also claimed it was forced to halt withdrawals due to "extreme market conditions".
3AC, a crypto hedge fund, played a part in Voyager's current predicament. The fund had exposure to Luna, a cryptocurrency which recently collapsed from over $80 to less than a cent. 3AC has also recently filed for bankruptcy.
According to Cointelegraph, there are rumours surrounding KuCoin, another crypto exchange. Some speculate that KuCoin is insolvent and have warned others to withdraw from the exchange, but Johnny Lyu, chief executive of KuCoin, insists that the exchange has no plan to halt withdrawals.
