Court strips legal protections in Voyager bankruptcy case, raising stakes for crypto liquidation professionals

The legal safety net protecting professionals overseeing Voyager Digital’s bankruptcy just got yanked away. US District Chief Judge Laura Taylor Swain vacated the exculpation provisions in Voyager’s confirmed Chapter 11 liquidation plan, ruling that the bankruptcy court simply didn’t have the authority to shield parties from future civil or criminal liability for actions taken during plan implementation. The ruling came after the US Department of Justice and the US Trustee appealed the protections, which had been designed to insulate a broad cast of characters, including debtors, committee members, Plan Administrator Michael Wyse, the Distribution Agent, released professionals, and employees, from lawsuits related to rebalancing transactions and distributing digital assets to customers. What the exculpation clause actually did Voyager’s version was narrower than some. It carved out exceptions for actual fraud, willful misconduct, and gross negligence. So the protection only applied to good-faith actions taken in the ordinary course of executing the plan. Still, Judge Swain found it went too far. The core issue: whether a bankruptcy court can grant what amounts to a prospective liab...