Stephen Ehrlich, CEO of the bankrupt cryptocurrency exchange Voyager Digitalmade millions of dollars selling Voyager stock in February and March 2021 when the stock was near its peak, nineteen months before the crypto-lending firm filed for bankruptcy in July 2022, financial records show .
Ehrlich’s earnings were driven by the stratospheric rise in Voyager’s stock price, which went from seven cents a share in October 2020 to $26 a share in March 2021. In the same period, Bitcoin rose 455% and Ether rose 688%.
Like Celsius, the company promised huge returns on the assets users entrusted to them. But as crypto prices went into freefall earlier this year, Voyager’s business proved unsustainable, prompting the company to freeze assets that retail investors had deposited in June and then to declare bankruptcy in July. Voyager held custody of $1.3 billion in client 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 to privileged LLCs, make it difficult to establish how much the Voyager co-founder took home.
What is clear, based on the companies’ insider information disclosures and Voyager filings, is that Ehrlich made more than $30 million in Voyager equity disposals when the crypto lender’s stock was nearing at a historic high.
Ehrlich and his Delaware LLCs sold nearly 1.9 million shares from February 9, 2021 to March 31, 2021, in 11 separate sales that totaled $31 million, according to Canadian Securities Administration data.
Ehrlich’s three largest deals, totaling 1.4 million shares worth nearly $19 million, were connected to a $50 million secondary offering from Stifel Nicolaus in February 2021
Voyager shares would hit a high of $29.86 in the week after Ehrlich’s final sale on April 5, 2021. Three weeks later, VOYG shares had lost 41% of their value. In November 2021, when the overall crypto market was peaking, Voyager was down 69% from its peak.
Many publicly traded companies have predetermined trading plans or restrictions on when senior executives and insiders can execute sales. In the United States, these 10b5-1 plans prevent insiders from using “material nonpublic information” to gain an advantage or benefit. In Canada, these plans are known as Automatic Securities Disposition Plans, or ADSPs.
On December 31, 2021, months after these insider sales, Voyager announced ADSP adoption for Ehrlich and another executive, COO Gerard Hanshe. Less than a month later, on January 20, 2022, Ehrlich announced the cancellation of ADSPs before the trades were completed.
“Despite having a floor significantly above the current share price, I felt it was in the best interest of investors to withdraw the plan,” Ehrlich said in a Press release. “Based on our key financial metrics, including revenue for the quarter ended December 31, 2021, as reported in our press release issued on 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 fell more than 70% from their peak last fall. In particular, the collapse of a stablecoin, Terra, which was supposed to be pegged to the US dollar, sent shock waves 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 made using client assets. Voyager insisted at the time that it would continue to honor customer withdrawals and exchanges.
Five days later, Ehrlich’s company froze customer withdrawals, leaving millions of users without access to their crypto assets. “This was a tremendously 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, hiring 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 funds since the process began.
The FDIC has since ordered Voyager to do so stop calling its products insured by the FDIC, calling the claims “false and misleading.”