Stephen Ehrlich, CEO of bankrupt cryptocurrency exchange Voyager Digital, made millions of dollars selling Voyager stock in February and March 2021 when shares nearly peaked, nineteen months before the crypto lending company filed for bankruptcy in July 2022, according to financial records demonstrate.
Ehrlich’s gains were fueled by the stratospheric rise in Voyager’s stock price, which soared from seven cents a share in October 2020 to $26 a share in March 2021. During the same period, bitcoin is up 455% and ether is up 688%.
Like the similarly competitive Celsius, the firm promised mammoth returns on assets entrusted to them by users. But when crypto prices went into freefall earlier this year, Voyager’s business proved unsustainable, leading the company to freeze assets that retail investors had deposited in June and then filed for bankruptcy in July. According to a bankruptcy filing, Voyager had held $1.3 billion in customer crypto assets spread across 3.5 million active users.
A complex and opaque corporate structure — including a reverse takeover of a defunct Canadian mining company, acquisitions and divestitures of Delaware limited companies, and consulting fees paid to insider LLCs — make it difficult to determine how much Voyager’s co-founders did was taken home.
Based on company insiders and Voyager filings, it is apparent that Ehrlich made over $30 million selling Voyager equity as the crypto lender’s shares neared an all-time high.
Ehrlich and its Delaware LLCs sold nearly 1.9 million shares from February 9, 2021 to March 31, 2021, in 11 separate sales totaling $31 million, according to the Canadian Securities Administration.
The three largest of Ehrlich’s transactions — a total of 1.4 million shares worth nearly $19 million — involved a $50,000,000 secondary offering by Stifel Nicolaus in February 2021.
Voyager stock would hit a weekly high of $29.86 following Ehrlich’s outright sale on April 5, 2021. Three weeks later, VOYG shares had lost 41% of their value. By November 2021 – when the crypto market as a whole peaked – Voyager was down 69% from its peak.
Many public companies have restrictions or predetermined trading schedules on when executives and insiders can make sales. In the United States, these 10b5-1 plans prevent insiders from using “material nonpublic information” to gain an advantage or gain. In Canada, these plans are known as Automatic Securities Scheduling Plans, or ADSPs.
On December 31, 2021, months after these insider sales, Voyager announced the launch 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 among them.
“Even though I had a floor well above the current share price, I felt it was in investors’ best interests to withdraw the plan,” Ehrlich said in a press release. “Based on our key financial metrics, including earnings for the quarter ended December 31, 2021, as disclosed in our press release dated January 5, 2022, I believe Voyager is undervalued.”
Ehrlich did not respond to multiple requests for comment.
Voyager ran into trouble earlier this year when crypto prices fell more than 70% from their peak last fall. In particular, the collapse of a stablecoin, Terra, which was set to be pegged to the US dollar, sent shockwaves through the industry.
Voyager told creditors June 27 that hedge fund Three Arrows Capital had defaulted on a $650 million loan that Voyager extended using client assets. At the time, Voyager insisted it would continue to honor customer withdrawals and withdrawals.
Five days later, Ehrlich’s firm froze customer withdrawals, leaving millions of users without access to their crypto assets. “This was an enormously difficult decision, but we believe it is the right one given the current market conditions,” Ehrlich said in a statement.
On July 6, the crypto lender filed for Chapter 11 bankruptcy protection and hired white-shoe firm Kirkland and Ellis and investment bank Moelis & Company to advise them during the process. Since the start of the procedure, numerous petitioners have moved to regain access to their holdings.
The FDIC has since ordered Voyager to stop calling its products FDIC-insured, calling the claims “false and misleading.”