Key Points
- Banq, subsidiary of Prime Trust, has submitted a petition for Chapter 11 bankruptcy protection.
- As per the bankruptcy filing, the company has liabilities amounting to approximately $5.4 million.
- The internal challenges faced by Banq include an “unauthorized transfer” of $17.5 million in assets by former officers, which consisted of trade secrets.
Sources have revealed that Banq, a firm that specializes in offering payment and custody services for both crypto and fiat currencies to other crypto businesses, has initiated the process of declaring bankruptcy. The news follows the recent layoff of one-third of its staff.
The company had also faced regulatory issues in Texas, resulting in a fine of nearly $30,000 in 2022 for conducting money transmission activities in the state without a license. Despite this setback, Prime Trust had indicated its intention to reapply for a Texas Money Transmitter License “swiftly” before withdrawing its application altogether. The bankruptcy of Prime Trust is a significant development in the crypto industry, and its impact on the sector remains to be seen.
Crypto software company Banq filed for bankruptcy protection today in Nevada https://t.co/ckmt6V6AMl pic.twitter.com/4EmKzowj24
— Randall G. Reese (@Chapter11Cases) June 13, 2023
Banq Goes Bankrupt
Banq, subsidiary of Prime Trust, recently filed for Chapter 11 bankruptcy protection in a bankruptcy court located in the district of Nevada, US. The filing cites liabilities worth approximately $5.4 million, which has led to this unfortunate situation. This news comes amidst Prime Trust’s efforts to finalize a deal of acquiring BitGo, adding to the complexity of the situation.
The financial crisis that Prime Trust has been facing is a result of the Celsius bankruptcy, which has had a significant impact on the company’s financial stability. However, the recent bankruptcy filing by Banq has further added to the company’s woes.
Banq’s Internal Fights
The submitted documents also disclose that ex-executives of the corporation have absconded their assets worth $17.5 million through “unauthorized transfer.” These assets consist of several confidential business information, exclusive company secrets, and advanced technology, which have been relocated in Fortress NFT Group.
The Fortress NFT Group, a new player in the NFT market, has been accused of stealing trade secrets of Banq. The Banq scandal involves a trio of executives, including the former CTO, CPO along with their CEO, who are accused of fraudulent activities to conceal their misconduct. The lawsuit filed by Banq reveals that Scott Purcell, the former CEO, made attempts to shift the company’s focus towards NFTs, which has raised suspicions about his intentions and involvement in the alleged fraud.
However, when faced with opposition from the board members, Purcell took matters into his own hands and established Fortress NFT. The lawsuit alleges that Banq’s computer systems, intellectual property, and corporate framework were transferred to the newly formed company.
As per the bankruptcy suit, “Their theft of Banq’s corporate assets even included taking the company’s seat licenses for Las Vegas Raiders’ games at Allegiant Stadium, all without Board approval or knowledge. Specifically, Defendant Purcell transferred the seat licenses owned by Banq to himself,”
Interestingly, Prime Trust CEO Tom Pageler was replaced by Jor Law, the current interim CEO, in November 2022.
Similar Bankruptcies
This news comes on the heels of a similar announcement by Genesis Global Capital, one of the largest crypto lenders, which filed for U.S. bankruptcy protection in January this year.
The company owes creditors a staggering $3.4 billion after being toppled by a market rout. Genesis’ lending unit froze customer redemptions in November 2022, following the bankruptcy filing of exchange FTX. This has raised concerns that other companies in the crypto space could also face a similar fate.
End Note
The recent news of Banq’s bankruptcy filing has sent shockwaves through the crypto industry. Many are now questioning the stability of the sector, which has already been under increased regulatory scrutiny in recent years. The failure of a major player like Prime Trust could further erode confidence in the industry, causing investors to reconsider their positions.
