August 19, 2022 – The Debtors' Official Committee of Unsecured Creditors (“Committee*”) has objected to the Debtors’ proposed $1.9mn key employee retention plan (the “KERP”) [Docket No. 316] arguing that the Debtors' non-insider management, far from needing incentives to stick around, are lucky to have jobs at all given dramatically reduced operations and "barren" opportunities elsewhere. Beyond the inappropriateness of awarding bonuses to management responsible for the "Debtor's flawed business model" while customers "struggle to pay basic personal expenses," the Committee questions why the Debtors have not slimmed down their employee base as other more successful (or less un-successful) cyrptocurrency companies have done. What exactly are the Debtors' over 300 employees doing, the objection wonders, given "the platform was frozen seven weeks ago has been limited to ‘routine maintenance and updates on the Debtors’ platform'?"
* Comprised of (i) Russell G. Stewart (TMF Mortgage), (ii) Jason Raznick, (iii) Brandon Mullenberg, (iv) Richard Kiss (Thincat Trust) and (v) Christopher Moser.
The objection states, “At a time when thousands of creditors struggle to pay basic personal expenses due to the Debtors’ flawed business model, the Debtors now seek to pay bonuses to their already well-compensated employees. And despite customer heartaches, many of which are set forth in dozens of letters filed on the docket, the Debtors have taken no measures to reduce headcount. This stands in stark contrast to how some of the most prominent cryptocurrency companies have reacted since the start of the ‘crypto winter,’ including Coinbase (18% staff reduction), BitPanda (27% staff reduction), Blockfi (20% staff reduction), and Blockchain.com (20% staff reduction). To be clear, the foregoing companies are still operating in the ordinary course of business, while the Debtors’ platform has been essentially frozen with no or minimal operations for the last seven weeks.
The Debtors have not provided any evidence to justify the retention awards beyond conclusory statements that these employees are needed. Importantly, the Debtors provide no evidence that the 38 Participants are at risk of resigning. And that is because no such evidence exists—since the Petition Date, only 12 of the Debtors’ approximately 350 employees have voluntarily resigned. This lack of attrition is attributable to the current employment market in the cryptocurrency space as a result of the aforementioned industrywide layoffs.
For these reasons, it is difficult to understand how the KERP ‘is necessary and appropriate to avoid costly disruptions to the Debtors’ business and allow the Debtors to resume operations post-emergency,’ as the Debtors allege. The primary responsibilities of these employees since the platform was frozen seven weeks ago has been limited to ‘routine maintenance and updates on the Debtors’ platform.’ Presumably, these routine duties could be performed by the Debtors’ current employee base even assuming there is some level of attrition. In attempting to justify the KERP, the Debtors point to the unique skillset and institutional knowledge of the Participants, which the Debtors assert are ‘exceptionally hard to replace’ in the ‘hottest job market in recent history.’ Both of these statements are simply wrong. First, given the downturn of the cryptocurrency industry as a whole, the job market is relatively barren. Second, given the recent reductions and layoffs across the industry, a bevy of recently-terminated professionals could fill their roles. The facts and circumstances do not support a KERP in these Chapter 11 Cases”.
A hearing to consider the objection is scheduled for August 24, 2022.
Background
On August 2, 2022, the Debtors requested Court approval of a proposed KERP that includes 38 non-insider employees (the “KERP Participants”) at an aggregate cost of $1.9mn [Docket No. 212].
Read more Bankruptcy News
The post Voyager Digital Holdings, Inc. –Creditors’ Committee Objects to Debtors’ Proposed KERP, Takes Issue with Size of Debtors’ Worforce appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.