Voyager Won’t Sue Its Executives Who Approved A Risky Loan To 3AC

According to new court filings in the Voyager bankruptcy proceedings, the committee entrusted with probing the lender’s failure suggests settlements with key executives for their participation in a roughly $1 billion loan to failed hedge fund Three Arrows Capital.

The documents are part of a purchase agreement that will be presented to the court on Wednesday. At the end of last month, FTX bought the assets of the insolvent institution for around $1.4 billion, putting the Chapter 11 bankruptcy process to completion. The selling procedure must still be approved by the court and creditors.

Part of that sales process includes acting on the findings of a special committee inquiry of the company, including alleged leadership errors.

A settlement with CEO Stephen Ehrlich and former CFO Evan Psaropoulos is among its suggestions. Ehrlich and Psaropoulos decided to lend $1 billion in cryptocurrency to 3AC.

With the collapse of the TerraUSD stablecoin, the hedge fund would implode, leaving Voyager with a roughly $1 billion claim and worries that Ehrlich and Psaropoulos may not have done enough due diligence or structured the loan in a way that would have better safeguarded Voyager.

However, the probe determined that pursuing negligence claims against the executives would be difficult. Instead, it suggests settlements in which they restore $1.3 million to $3 million in personal assets and up to $20 million through directors’ and officers’ liability insurance.

The inquiry discovered no evidence of fraud or obvious mistakes around the 3AC loan that could be easily demonstrated in court. According to the filings, while the settlement would not reduce the cost of the executives’ choices, litigating them would likely result in less money.

This agreement would also release claims against Ehrlich and Psaroupoulos, which was a stumbling point for the creditors’ committee.

The creditor committee has just filed a limited objection to the selling deal over releases that would shield the executives from potential legal action. The committee is requesting that the court notify creditors of these conditions and allow a third voting option in the creditor vote that agrees with the plan but opposes the releases.

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