Sanjian Capital’s Bankruptcy and the Role of Voyager Digital

03/01/2023 10:46 • Daily Digest • 109 views

According to reports, court documents submitted on Tuesday showed that just a few weeks before filing for bankruptcy, the crypto hedge fund Sanjian Capital (3AC) sent a one-page statement of net asset value (NAV) to the lending agency Voyager Digital. Voyager said that it had lent $654 million to 3AC, accounting for nearly 58% of its loan portfolio. During this period, both parties only conducted one due diligence.

During the period of Voyager’s loan of US $654 million to 3AC, both parties only conducted one due diligence

Interpretation of the news:

Sanjian Capital, a cryptocurrency hedge fund, recently filed for bankruptcy, followed by reports on Tuesday that revealed the company had sent a one-page net asset value statement to Voyager Digital, a lending agency, just a few weeks before the bankruptcy filing. This led to Voyager admitting to having lent $654 million to 3AC, accounting for nearly 58% of its loan portfolio. What’s concerning is the fact that Voyager only conducted one due diligence on the investment before providing the loan.

This revelation raises a few questions about the due diligence process at Voyager Digital. Due diligence is a critical step in investing and lending that involves reviewing critical financial, legal and operational information relating to the companies involved. This process helps investors or lenders to make informed decisions and mitigate the risk of the investment. In this case, the fact that Voyager Digital only conducted one due diligence on its investment, which constituted a large portion of its loan portfolio, suggests a lack of proper risk management protocols.

Moreover, the fact that Sanjian Capital only provided a one-page statement of net asset value should have raised red flags, as it’s not enough information to evaluate the health of the hedge fund. Voyager Digital’s reliance on this one-page report, which turned out to be insufficient, speaks to the need for investors and lenders to conduct thorough due diligences before putting their money at risk.

Additionally, given the volatility of the cryptocurrency market, it’s also essential for investors and lenders to conduct regular monitoring of their investments to detect any potential risks that may arise. The lack of regular monitoring by Voyager Digital raises even more questions about the adequacy of the company’s risk management and due diligence processes.

In conclusion, Sanjian Capital’s bankruptcy raises questions about the role of Voyager Digital in mismanaging its investment and failing to conduct proper due diligence. Both companies should use this as a learning opportunity to establish robust risk management and due diligence protocols to avoid similar situations in the future.

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